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 - (DIS) – BUY
BUY the Walt Disney Corp (DIS) April 2019 $100-$104 in-the-money vertical BULL CALL spread at $3.40 up to $3.70
Opening Trade
3-20-2019
expiration date: April 18, 2019
Portfolio weighting: 10%
Number of Contracts = 30 contracts
Walt Disney (DIS) shares have just suffered a 6% dive on the news they will buy the assets of 20th Century Fox in one of the largest entertainment takeovers in history. The new combined mega company will dominate Hollywood and content production in general.
This gives us a rare entry point to get into one of the most powerful brand franchises on the planet. Disney is just about to launch its own streaming service which will allow them to take a generous share of the Netflix and Amazon businesses. Disney is spending a staggering $12 billion on new content this year. The parks are all packed to the gills. They already launch so many blockbuster movies that they have to be rationed awards at the Oscars.
It really is a company that is firing on all cylinders as long as its erstwhile CEO Bob Iger doesn’t run for president in 2020.
I am therefore buying the Walt Disney Corp (DIS) April 2019 $100-$104 in-the-money vertical BULL CALL spread at $3.40 or best. Don’t pay any more than $3.70 or the risk-reward will turn against you.
This is in keeping with my recent strategy of only taking on very deep in-the-money, very short dates positions. This is the only way to work with a long-term topping market which could continue on for months. It also doesn’t hurt that (DIS) shares are sitting right at two-month support on the charts.
This is a bet that Disney shares will not fall below the $104 strike price by the April 18 options expiration date. That would be a total decline of 11.32% from the recent top for one of the best run companies in America.
If you don’t do options, buy a small position the stock outright for a quick trade.
Here are the specific trades you need to execute this position:
Buy 30 April 2019 (DIS) $100 calls at………….………$11.00
Sell short 30 April 2019 (DIS) $104 calls at………….$7.60
Net Cost:……………………..…….………..………….….....$3.40
Potential Profit: $4.00 - $3.40 = $0.60
(30 X 100 X $0.60) = $1,800 or 11.76% in 18 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.
