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 Alert - Facebook, Inc. (FB) – SELL – TAKE PROFITS
SELL Facebook, Inc. (FB) February 2020 $190-$200 in-the-money vertical BULL call spread at $9.62
Closing Trade
2-12-2020
expiration date: February 21, 2020
Portfolio weighting: 10%
Number of Contracts = 11 contracts
We have harvested 75.86% of the profits on this call spread and I believe this is a good closing point.
There are some regulatory headwinds coming up and after WhatsApp surpassed 2 billion users, I believe taking profits is the right thing to do.
Markets are frothy and so it’s better to cut it short here and pocket this great trade than risk the market's wrath.
This is one of the arduous trading climates of recent past.
Holders of this call spread still have a 78% chance of expiring with full profits.
I hate the CEO but the businesses are a powerful specimen.
Why did I do the trade in the first place?
Shares were down 7% when I executed a call spread and the stock has lifted nicely after a mixed earnings report.
Here are the specific trades you need to execute this position:
SELL 11 February 2020 (FB) $190 call at………….……..........…$20.77
Buy to cover short 11 February 2020 (FB) $200 call at…..…….$11.15
Net Proceeds:………………....................……..…….………..…….....$9.62
Profit: $9.62 - $8.42= $1.20
(11 X 100 X $1.20) = $1,320 or 13.20%
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 about how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Spread” 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.
