When John identifies a strategic exit point, he will send you an alert with specific trade information on 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 - (DAL) –STOP LOSS
SELL the Delta Airlines (DAL) February 2024 $35-$38 in-the-money vertical Bull Call spread at $2.10 or best
Closing Trade
1-16-2024
expiration date: February 16, 2024
Portfolio weighting: 10%
Number of Contracts = 40 contracts
The great earnings for Delta Airlines came in as I expected. (DAL) also dodged the Boeing bullet as the company has no 737 MAX 9 aircraft, the kind whose door popped out last week midflight. That is why I bought (DAL) instead of (UAL) or (ALK).
But that wasn’t good enough for traders. So when the company announced a 3% traffic slowdown in the current quarter, normal for this time of year, they trashed the stock, taking it down 9.0%. The news in fact took the entire airline sector down big time.
Even though we are only in the third week of the year, we already have substantial profits to protect.
I am therefore selling the Delta Airlines (DAL) February 2024 $35-$38 in-the-money vertical Bull Call spread at $2.10 or best.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by 5 cents with a second order.
Airline share prices are driven by the health of the economy, interest rates, and fuel prices and all three are now headed in the right direction. The Fed may put rates 3-6 times this year, the economy is on the eve of a strong recovery, and low fuel prices are made possible by the ongoing price war at OPEC.
Planes are flying full for the first time in years. Ticket prices are rising dramatically. There is a severe aircraft shortage in the works.
Delta Airlines (DAL) is one of a handful of legacy airlines that used the pandemic to expand their business, not shrink it, along with Southwest (LUV) and Alaska (ALK).
This was a bet that Delta Airlines (DAL) would not trade below $38.00 by the February 16 option expiration day in 25 trading days.
Here are the specific trades you need to close out this position:
Sell 40 February 2024 (DAL) $35 calls at………….…......……$3.90
Buy to cover short 40 February 2024 (DAL) $38 calls at…..$1.80
Net Proceeds:……………………..……..........……….........…….....$2.10
Loss: $2.60 - $2.10 = $0.50
(40 X 100 X $0.50) = $2,000.
If you are uncertain about 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.
