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) June 2020 $120-$125 in-the-money vertical BEAR PUT spread at $4.40 or best
Opening Trade
5-12-2020
expiration date: June 19, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
As much as I love Walt Disney for the long term, the near term outlook is cloudy at best.
Thanks to the pandemic, it is suffering the perfect storm of assaults on its core businesses of theme parks, cruise lines, and hotels. Virtually no other company has more exposure to the pandemic than (DIS).
Its hugely successful movie production business is shut down, limited to planning only. While the Shanghai park is open, it is limited to a ruinous 30% attendance level for health reasons. There is no shaking hands with Mickey Mouse. I am therefore willing to bet that (DIS) will not take a run at new all-time highs over the next four weeks.
I see 5% of maximum upside in the main stock indexes against 15% of potential downside. The market is now discounting a best-case scenario, which is unlikely to come through. What buying there is takes place in only the five big tech stocks.
I am therefore buying the Walt Disney Corp. (DIS) June 2020 $120-$125 in-the-money vertical BEAR PUT spread at $4.40 or best.
I know prices are all over the map right now, but you get the general idea. If you can’t get this one done, move your strike prices DOWN $5.
Only use a limit order. 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 raise your bid by ten cents with a second order.
Don’t pay more than $4.60 or you’ll be chasing.
If you don’t do options, buy the stock outright for a long term play.
This is a bet that Walt Disney shares will NOT rise above $120 by the June 19 option expiration date in 27 trading days.
Here are the specific trades you need to execute this position:
Buy 23 June 2020 (DIS) $125 puts at…….…...…$18.00
Sell short 23 June 2020 (DIS) $120 puts at…….$13.60
Net Cost:………………………….…………..…..….….....$4.40
Potential Profit: $5.00 - $4.40 = $0.60
(23 X 100 X $0.60) = $1,380 or 13.63% in 27 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 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.
