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 - (CCL) – BUY
BUY the Carnival Cruise Lines (CCL) March 2020 $37.50-$40.00 in-the-money vertical Bull Call spread at $2.20 or best
Opening Trade
2-19-2020
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 45 contracts
The travel sector has been far and away the worst hit by the global Coronavirus epidemic, including hotels, cruise lines, casinos, and airlines. People are not about to pay up for a trip when they face a one in 50 chance of contracting a fatal disease from the passenger sitting next to them.
As a result, the shares have been hammered, down by 25% in a month in many cases. At these levels, the coronavirus hit stocks have already delivered the worst-case scenario. The next big move will be to the upside, once the pandemic fades.
Not only that, with the Mad Hedge Market Timing Index at 55 level, near its 2020 low, we are at the bottom end of a three-month range. The new trading range seems to be 50-95 in this massively over stimulated market.
I am therefore buying the Carnival Cruise Lines (CCL) March 2020 $37.50-$40.00 in-the-money vertical Bull Call spread at $2.20 or best
This is a bet that Carnival Cruise Lines (CCL) will not trade below $40.00 by the March 20 option expiration day in 22 trading days.
Don’t pay more than $2.30 for this position or you’ll be chasing.
Carnival has suffered the worst thing ever by a cruise line X 10, short of sinking. Its Diamond Princess was quarantined in Japan for three weeks, and all its future cruises cancelled. Some 50 passengers contracted the disease. They only just got off yesterday and were flown to Travis Air Force Base in California.
Suffice it to say, this stock has a shipload of bad news already priced in the market. That makes it a rare “BUY”.
This stock also benefits from major technical support at the last low in October just below $40. The stock has already fallen 20% in a month.
If you don’t do options, buy the stock for a medium-term trade.
For a safer, lower volatility trade buy the Invesco Shipping ETF (SEA), a basket of the largest companies in this sector.
Here are the specific trades you need to execute this position:
Buy 45 March 2020 (CCL) $37.50 calls at…………..………$5.90
Sell short 45 March 2020 (CCL) $40.00 calls at………….$3.70
Net Cost:…………...........…………..…….………..………..….....$2.20
Potential Profit: $2.50 - $2.20 = $0.30
(45 X 100 X $0.30) = $1,350 or 13.36% in 22 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 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.
