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) - STOP LOSS
SELL the Amazon (AMZN) January 2019 $1,200-$1,300 in-the-money vertical BULL CALL spread at $84.00 or best
Closing Trade
12-24-2018
expiration date: January 18, 2019
Portfolio weighting: 17.8%
Number of Contracts = 2 contracts
Markets are bouncing for now, so it is time to dump my last equity position. It looks like holding a 73% cash position was not enough for this market.
I am therefore selling the Amazon (AMZN) January 2019 $1,200-$1,300 in-the-money vertical BULL CALL spread at $84.00 or best. Please note that I had to call back my staff from their Christmas vacations to execute this trade alert.
In case you have to ask, this is why we do call spreads. A $255 point, or 16% loss in the Amazon share price in three trading days, the sharpest fall since 1987, ended up costing us all of 1.0% in a double weighted position.
If you have the stock, keep it. A sharp bounce will start any day now. We just can’t carry this as an options position any longer.
Here are the specific trades you need to execute this position:
Sell 2 January 2019 (AMZN) $1,200 calls at…….………$214.00
Buy to cover short 2 January 2019 (AMZN) $1,300 calls at .$130.00
Net Cost:………………………….…………..…….….....$84.00
Loss: $89.00 - $84.00 = $5.00
(2 X 100 X $5.00) = $1,000
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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
