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 Trade Alert - Dropbox, Inc. (DBX) – BUY
BUY Dropbox, Inc. (DBX) September 2020 $16.50-$19.50 in-the-money vertical BULL CALL spread at $2.56
Opening Trade
9-3-2020
expiration date: September 18, 2020
Portfolio weighting: 10%
Number of Contracts = 39 contracts
Dropbox (DBX), the cloud company, is down around 6% today and this is a short-term trade that the underlying stock will stay above $19.50 by September 18th.
This has been the worst day in the Nasdaq since the March madness.
DBX has support at $19.80 and my bet is the tech weakness won’t turn into a rout.
How was their last earnings report?
Dropbox reported net income of 22 cents a share, compared with 10 cents a year ago. Revenue improved 16% to $476.4 million from $401.5 million a year ago.
This is a fairly aggressive trade and I will take profits on the first jolt up and cut losses if the weakness rolls into something more substantial.
If you don’t do options, take a pass on this one.
Here are the specific trades you need to execute this position:
Buy 39 September 2020 (DBX) $16.50 calls at………….………$3.95
Sell short 39 September 2020 (DBX) $19.50 calls at………….$1.39
Net Cost:………….......................…………..…….………..…..….....$2.56
Potential Profit: $3.00 - $2.56 = $0.44
(39 X 100 X $0.44) = $1,716 or 17.16% in 15 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.
