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.
Tech Alert - Cisco Systems, Inc. (CSCO) – SELL – TAKE PROFITS
SELL the Cisco Systems, Inc. (CSCO) August 2020 $38-$41 in-the-money vertical BULL call spread at $2.98
Closing Trade
8-20-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 38 contracts
Cisco was trading around $48 when poor guidance from the earnings report hammered the stock down to $43, a mammoth 10% loss in one day.
The underlying stock has been trending down the past week to $42 and then flirted with the $41.60 range.
This is a little too close for comfort with our $41 upper strike price and I am inclined to take profits 1 day before expiration as the stock is responding today positively.
That being said, Cisco has a 91.6% of staying above $41 by tomorrow’s closing.
Essentially, Cisco’s underlying stock needs to fall around 3% from current prices for you to not harvest 100% of the maximum profits.
The risk-reward proposition is not worth going the extra day as the lion's share of the profits has been accrued.
I am inclined to put more money after work after we take profits on tomorrow’s expiration for the Microsoft and Adobe call spread.
The Mad Hedge Technology trade alert portfolio is firing on all cylinders and we stay nimble.
Here are the specific trades you need to exit this position:
Sell 38 August 2020 (CSCO) $38 call at…………..............………$4.35
Buy to cover short 38 August 2020 (CSCO) $41 call at………….$1.37
Net Proceeds:……………………..………..…….....$2.98 (midpoint is $3)
Profit: $2.98 - $2.60 = $0.38
(38 X 100 X $.38) = $1,444 or 14.44% in 43 days
To see how to enter this trade in your online platform, please look at the order ticket below, 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.
