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 - JD.com, Inc. (JD) – SELL – TAKE PROFITS
SELL TAKE PROFITS - JD.com, Inc. (JD) October 2021 $80-$85 in-the-money vertical BEAR put spread at $4.50
Closing Trade
10-8-2021
expiration date: October 15, 2021
Portfolio weighting: 10%
Number of Contracts = 23 contracts
This was a short-term bet that Chinese ecommerce firm JD.com, Inc. (JD) would stay BELOW $80, and this trade has gone sharply against us after news broke that Chairman Xi and President Joe Biden agreed to a virtual meeting.
After the announcement, JD stock exploded to the upside by 10% and the momentum has continued into today and I believe it’s better to take a modest profit now than try to fight that momentum going into the October 15th expiration.
Seldom a position reverses in the way our JD put spread did, but a 2 for 1 special announcement of the virtual meeting along with the agreement to raise the debt ceiling fueled a short-term burst of risk-on activity.
While the JD October put spread is still in the money, we will sacrifice full profits on this trade and take the 5.9% on the table now.
Under no circumstances should you ever hold Chinese tech stocks for the long-term, they are a barrel of gunpowder waiting to be lit.
Here are the specific trades you need to exit this position:
Sell to Close 23 October 2021 (JD) $85 puts at………….………$8.15
Buy to Close 23 October 2021 (JD) $80 puts at………….$3.65
Net Proceeds:……………………..…….………..…….....$4.50
Profit: $4.50 - $4.25 = $.25
(23 X 100 X $.25) = $575 or 5.90%
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.
