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 - (FB) – TAKE PROFITS
SELL the Facebook (FB) August 2020 $290-$300 in-the-money vertical Bear Put spread at $9.95 or best
Closing Trade
8-17-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 11 contracts
At this morning’s opening we have captured 95% of the maximum potential profit in this position in only five trading days. The risk/reward of continuing is no longer favorable.
I believed that Facebook (FB) shares are overbought in the extreme, and that there is some nice cherry-picking to be had. That turned out to be the case, at least on a five-day view.
I am therefore selling the Facebook (FB) August 2020 $290-$300 in-the-money vertical Bear Put spread at $9.95 or best.
This was a bet that Facebook shares would NOT rise above $290 by the August 21 option expiration date in 9 trading days.
Here are the specific trades you need to exit this position:
Sell 11 August 2020 (FB) $300 puts at……......………………$39.00
Buy to cover short 11 August 2020 (FB) $290 puts at…….$29.05
Net Proceeds:………….......……………….…………..……….….....$9.95
Profit: $9.95 - $9.00 = $0.95
(11 X 100 X $0.95) = $1,045 or 11.11% in 5 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.
