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 - Lyft, Inc. (LYFT) – SELL
SELL - TAKE PROFITS Lyft, Inc. (LYFT) May 2020 $32.50-$37.50 in-the-money vertical BEAR put spread at 3.75
Closing Trade
4-20-2020
expiration date: May 15, 2020
Portfolio weighting: 10%
Number of Contracts = 26 contracts
This was a short-term trade that Lyft, Inc. (LYFT) wouldn’t rise above $32.50 – this was a short term bet that shares will trade sideways to down.
If you have read the Mad Tech Letter, you know that I believe rideshare business models will never become profitable.
When we executed the option spread, shares tumbled by 7% then we experienced a short-term hard-to-stomach rally as the tide lifted all boats as tech growth stocks rocketed.
I was shocked to see Uber rise 8% on the news that they were removing guidance and Lyft experienced similar frothy price action.
The news was highly negative and I still cannot understand how this company will improve in the short or long term.
Lyft’s skyrocketing on bad news signals a good time to get out of this trade.
In the end, I did use Lyft’s put spread as a hedge to strap on 2 more long equity trades in tech growth stocks as we rally on re-opening the economy and investors hide out in tech corona stocks.
I will look for another put spread to hedge our long equity positions.
It’s an understatement to say that tech shares have decoupled from the underlying economy, it’s almost as if they are acting in a vacuum.
This is not the time to bet the ranch – capital preservation is the phrase of the day.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
If you cannot get it done, then wait for the next trade. Markets are moving fast today with gaps in pricing.
Here are the specific trades you need to execute this position:
Sell 26 May 2020 (LYFT) $37.5 put at………................….………$8.20
Buy to cover short 26 May 2020 (LYFT) $32.50 put at………….$4.45
Net Proceeds:……………….....................……..…….………..…….....$3.75
Profit: $3.75 - $3.73 = $.02
(26 X 100 X $.02) = $52 or .052%
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 “How to Execute a Vertical Bull Call Spread” by clicking here at
http://www.madhedgefundtrader.com/ltt-vbpds/
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.
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 “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.
