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) December, 2018 $1,450-$1,500 in-the-money vertical BULL CALL spread at $29.00 or best
Closing Trade
11-20-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts = 3 contracts
It looks like Thanksgiving came early this year, especially the gutting and carving part, at least in terms of my positions.
The break of the 7,000 low in NASDAQ means that we are not double bottoming before a year-end rally, as I thought. It means we have one more leg to go, and THEN we get a yearend rally.
However, I am not inclined to bet my entire 2018 performance on this thesis. I am therefore cutting back risk.
I am surprised that stocks are doing a Dotcom bust repeat with a backdrop of such great earnings. I have been surprised before and I will be surprised again. It’s time to live to fight another day.
I am therefore selling the Amazon (AMZN) December, 2018 $1,450-$1,500 in-the-money vertical BULL CALL spread at $29.00 or best.
That means get out at any price you can get.
This was a bet that Amazon shares will NOT fall below $1,500 by the December 21 option expiration date in 33 trading days. That would be a decline of a heart-stopping 31% from the October high weeks ago or a loss of $340 billion in market capitalization. It looks like that is what we are going to get.
Yes, the world’s second largest company lost a third of its value in a month for you to lose money on this trade, off the back of a great earnings report.
If you bought Amazon shares outright, keeps them. It’s going to new all-time highs once the current panic burns itself out.
Here are the specific trades you need to execute this position:
Sell 3 December 2018 (AMZN) $1,450 calls at…….………$41.00
Buy to cover short 3 December 2018 (AMZN) $1,500 calls….$12.00
Net Cost:………………………….…………..…….….....$29.00
Loss: $38.00 - $29.00 = -$9.00
(3 X 100 X -$9.00) = -$2,700.
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.
