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 – STOP LOSS
SELL – STOP LOSS the Alphabet Inc. (GOOGL) October 2020 $1,590-$1,600 in-the-money vertical BEAR put spread at $5.70
Closing Trade
10-12-2020
expiration date: October 16, 2020
Portfolio weighting: 10%
Number of Contracts = 11 contracts
Google is experiencing a massive melt-up with shares up over 5% just today and over 10% in the past week.
It’s behaving like a growth stock amid reports that Softbank is leveraged deeply in the option’s market.
We need to cut losses here. This is extremely unusual for Google to be up 5% on absolutely no meaningful news.
This was just a short-term bet that the stock wouldn’t explode higher and it has.
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.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Here are the specific trades you need to exit this position:
Sell 11 October 2020 (GOOGL) $1,600 puts at…………...............………$29.20
Buy to cover short 11 October 2020 (GOOGL) $1,590 puts at………….$23.50
Net Proceeds:……………................................………..…….………..…….....$5.70
Loss: $8.75 - $5.70 = -$3.05
(11 X 100 X -$3.05) = $3,355 or 34.85%
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.