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 - Alphabet Inc. (GOOGL) - SELL
SELL – TAKE PROFITS - Alphabet Inc. (GOOGL) June 2020 $1,495-$1,500 in-the-money vertical BEAR put spread at $4.95
Closing Trade
5-14-2020
expiration date: June 19, 2020
Portfolio weighting: 10%
Number of Contracts = 22 contracts
Another opening and another pitiful start as unemployment numbers paint a grim snapshot of what is happening in the U.S.
The force of the risk-off move this morning has been quite strong and markets must digest some of the weakness.
Google is not immune to the troubles of the wider economy, and in terms of many of the Nasdaq mainstays, traders are merely taking profits.
We are in the nosebleed section right now and in no way, shape, or form should anyone be 100% long with no protection, which is why we are sprinkling put spreads in order to protect our call spread.
I would be inclined to add another put spread after taking profits in this one.
Long term, this is a great company, but this is just a short-term position.
We have recently taken in a raft of new subscribers and welcome to the beginning of your trading journey in the strongest sector the public markets have to offer.
Prices are all over the map today and newbies should practice paper trading before they put real capital to work.
Do not chase prices if they run away, prices are changing by the second in dramatic gaps. If the prices don’t come to you, then set a limit order and check it periodically.
If there is more consolidation in Google, cutting losses in the call spread will be warranted. Capital preservation is the call of the day. There is no way you can let the underlying stock take out your upper price strike.
The midpoint is $5 but $4.95 should get this done.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Here are the specific trades you need to execute this position:
Sell 22 June 2020 (GOOGL) $1,500 put at…………..............………$179.75
Buy to cover short 22 June 2020 (GOOGL) $1,495 put at………….$174.75
Net Proceeds:…………...........................…………..…….………..…….....$5.00
Potential Profit: $4.95 - $4.50 = $0.45
(22 X 100 X $0.45) = $990 or 9.90%
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 on 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.