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 - (DAL) –STOP LOSS
Sell the Delta Airlines (DAL) May 2021 $40-$43 in-the-money vertical Bull Call spread at $2.30 or best
Closing Trade
5-12-2021
expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 40 contracts
The cat was set among the pigeons this morning when the April Consumer Price Index printed an annualized rate of 4.2%.
Never mind that this is great news for airlines, which can raise prices immediately and accelerate their recovery. Traders want to go “RISK OFF” right now!
Since I have enormous profits to protect here, I am going to de-risk myself, even though we only have seven trading days left until the May 21 options expiration.
If we break $43.00, there is no support for this stock until we hit the 200-day moving average at $38.74. That would wipe out the value of this position.
I am therefore selling the Delta Airlines (DAL) May 2021 $40-$43 in-the-money vertical Bull Call spread at $2.30 or best
Airlines are facing a perfect storm this summer.
The end of the pandemic is upon us. Travel is exploding, with travelers bursting out of one-year lockups.
Planes are flying full for the first time in more than a year. 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).
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.
This was a bet that Delta Airlines (DAL) would not trade below $43.00 by the May 21 option expiration day in 12 trading days.
Here are the specific trades you need to enter this position:
Sell 40 May 2021 (DAL) $40 calls at…………..........………$4.00
Buy to cover short 40 May 2021 (DAL) $43 calls at….…..$1.70
Net Proceeds:……………………..…….………...………….….....$2.30
Loss: $2.50 - $2.30 = $0.20
(40 X 100 X $0.20) = $800.
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.
