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) – STOP LOSS
SELL the Walt Disney Corp. (DIS) June 2020 $120-$125 in-the-money vertical BEAR PUT spread at $4.00 or best
Closing Trade
5-19-2019
expiration date: June 19, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
A soaring stock market yesterday off the back of a successful Covid-19 trial at Moderna has (DIS) up 8% this morning and we are approaching our lower $120 strike prices. I am going to stick with my hard and fast rule of never letting losses exceed $2,000.
In any case, our loss here is more than offset by the profits we took last week on our long (DIS) position and the profits we are making in our huge bond shorts,
I am therefore selling the Walt Disney Corp. (DIS) June 2020 $120-$125 in-the-money vertical BEAR PUT spread at $4.00 or best.
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 lower your offer by ten cents with a second order.
This was a bet that Walt Disney shares would 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:
Sell 23 June 2020 (DIS) $125 puts at…................….……$12.00
Buy to cover short 23 June 2020 (DIS) $120 puts at…….$8.00
Net Proceeds:………........……………….…………..…..….….....$4.00
Loss: $4.40 - $4.00 = $0.40
(23 X 100 X $0.40) = $920 or 10%.
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.
