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 - eBay Inc. (EBAY) – SELL - TAKE PROFITS
SELL – eBay Inc. (EBAY) August 2020 $50-$53 in-the-money vertical BULL CALL spread at $2.83
Closing Trade
8-12-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 38 contracts
This was a short-term trade that eCommerce juggernaut eBay would stay above $53 and the price action has been quite weak, to say the least.
The underlying stock was trading around $56 when we executed the eBay call spread and shares have trended lower pretty much since Aug 4th.
The underlying stock even fell to $33.7 and we were deep in the red on this trade and by far is the highest risk of the 4 call spreads that are currently active.
The rotation trade is real and tech is feeling the brunt of it.
However, today has been great for eBay with the stock delivering and rocketing by over 3% offering me an optimal exit point to sell and take profits.
There is a chance this stock trends lower back to $53 and taking profits while I can is the smart thing to do.
Why consider eBay now?
The pandemic has boosted online shopping platforms such as eBay and Amazon.com Inc. even though double-digit unemployment has hurt the overall economy. In the second quarter, eBay reported gross merchandise volume, the value of all goods sold on its platforms, increased 26% to $27.1 billion from a year earlier. The company said it added 8 million new active buyers to end the quarter with 182 million. Analysts, however, projected almost 184 million.
Here are the specific trades you need to exit this position:
Sell 38 August 2020 (EBAY) $50 call at……….............….………$6.20
Buy to cover short 38 August 2020 (EBAY) $53 call at………….$3.37
Net Proceeds:…………....................…………..…….………..…….....$2.83
Profit: $2.83 - $2.65 = $.18
(38 X 100 X $.18) = $684 or 6.84% in 8 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.
