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) – TAKE PROFITS
SELL the Amazon (AMZN) July 2020 $2,500-$2,550 in-the-money vertical Bull Call spread at $49.50 or best
Closing Trade
7-6-2020
expiration date: July 17, 2020
Portfolio weighting: 10%
Number of Contracts = 2 contracts
Amazon finally hit my $3,000 target, giving it a spectacular market capitalization of $1.5 trillion.
The shares have risen by 10% since we added this position nine trading days ago. As a result, we have captured 91% of the maximum potential profit. The risk/reward of continuing is no longer favorable.
I am therefore selling the Amazon (AMZN) July 2020 $2,500-$2,550 in-the-money vertical Bull Call spread at $49.50 or best. If you can’t get his price, simply wait for the July 17 option expiration and collect the entire $50 price.
By coming out here you get to earn $1,100, or 12.5% in 9 trading days. Well done and on to the next trade.
When Amazon shares were at $1,000 at the beginning of 2019, I wrote a report calculating that its breakup value was at least $3,000 a share (click here). It looks like Amazon hit that target ….without the breakup. And the breakup value has since soared to $5,000 a share
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that Amazon (AMZN) would not trade below $2,550 by the July 17 option expiration day in 18 trading days.
Here are the specific trades you need to exit this position:
Sell 2 July 2020 (AMZN) $2,500 calls at……….......….………$520.00
Buy to cover short 2 July 2020 (AMZN) $2,550 calls at…...$470.50
Net Proceeds:……………………..…….……….........………….….....$49.50
Profit: $49.50 - $44.00 = $5.50
(2 X 100 X $5.50) = $1,100 or 12.5% 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.
