When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (AMZN) - BUY
BUY the Amazon (AMZN) August 2020 $3,300-$3,350 in-the-money vertical Bear Put spread at $42.00 or best
Opening Trade
8-10-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 3 contracts
When Jeff Bezos told me that he was leaving the hedge fund business and starting an online book company 25 years ago, I thought he had gone crazy. When he called it “Amazon”, I thought he had really lost it. Still, that was better than his other choice, “Cadabra”, which sounds like “Cadaver”.
He even got his stepfather, a humble oil engineer at Exxon in New Mexico, to invest much of his life savings in the venture, some $150,000. Today, that stake is worth $37 billion.
This cycle of Covid-19 infections is imminently going to peak out and start declining, at least for the short term.
As a result, I believe the core long FANG trade that has been driving markets this year is long overdue for a break. Instead, I think we are about to witness a major rotation into domestic economic “recovery” stocks. The indexes will keep going up, but the leadership will change. Bonds and gold are also due for profit-taking.
I believe that Amazon (AMZN) shares are overbought in the extreme, and that there is some nice cherry-picking to be had. As much as I like my old Morgan Stanley college Jeff Bezos, it is time to pick up a very short-term bearish position.
I am therefore buying the Amazon (AMZN) August 2020 $3,300-$3,350 in-the-money vertical Bear Put spread at $42.00 or best. Don’t pay more than $47.00 or you’ll be chasing.
If you don’t do options, buy the stock outright for an extreme oversold trading bounce.
This is a bet that Amazon shares will NOT rise above $3,300 by the August 21 option expiration date in 9 trading days.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Buy 3 August 2020 (AMZN) $3,350 puts at……....………$215.00
Sell short 3 August 2020 (AMZN) $3,300 puts at……….$173.00
Net Cost:………………………….…..............………..…….….....$42.00
Potential Profit: $50.00 - $42.00 = $8.00
(3 X 100 X $8.00) = $2,400 or 19.04% in 9 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
