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 - International Business Machines Corporation (IBM) - BUY
BUY International Business Machines Corporation (IBM) September 2020$130-$135 in-the-money vertical BEAR PUT spread at $4.35
Opening Trade
8-31-2020
expiration date: September 18, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
I am executing a short-term in-the-money bear put spread on International Business Machines Corporation (IBM).
This is a bet that the underlying stock will stay below $130 by Sept 18th expiration.
I am monitoring the other two call spread positions and the price action has been poor. FTNT and PANW, two great cybersecurity trading companies, are underperforming the broader Nasdaq index.
Granted we are at all time highs and that doesn’t mean I can shrug off the current trading climate and not trade.
It does mean that after lukewarm price action in two call spreads, I have good reason to start hedging into some potential volatility to the downside.
There is the potential I could start stacking a various assortment of put and call spreads to neutralize the beta.
No doubt this is not the time to bet the ranch. The U.S. economy is a dumpster fire and the tech sector and U.S. property market (in select regional cities) are the only assets appreciating.
And a fractious runup to the November election won’t help as well.
It just so happens that tech has come too far too fast and there is no shame at trading in the “regional” cloud stocks that I have trades in now.
I am now picking on International Business Machines Corporation (IBM) who specialize in year-over-year decreasing revenue thanks to former CEO Ginni Rometty who somehow managed to not get fired for years.
She is gone now but her lasting damage has been accrued.
This is a trade that plays on that lack of growth and if you do not do options, then bypass this trade.
Buy 23 September 2020 (IBM) $135 puts at………….………$10.63
Sell short 23 September 2020 (IBM) $130 puts at…….…….$6.28
Net Cost:………...............………………….………..………….….....$4.35
Potential Profit: $5.00 - $4.35 = $0.65
(23 X 100 X $0.65) = $1,495 or 14.95% in 18 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.
