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.
Trade Alert - (MSFT) – STOP LOSS
SELL the Microsoft (MSFT) April 2020 $160-$165 in-the-money vertical Bull Call spread at $3.90 or best
Closing Trade
4-20-2020
expiration date: April 24, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
Special Note: This is a one-week vertical bull call spread only
We are approaching our upper strike price in this call spread, and my risk control is tighter than usual. For some reason, they are hammering tech stocks today and I don’t want any part of it.
There, I am stopping out of Microsoft (MSFT) April 2020 $160-$165 in-the-money vertical Bull Call spread at $3.90 or best.
Fortunately, the loss on this trade will be more than offset by our substantial short positions in the (SPY), the (SDS) and (FB). By coming out here, we get to live to fight another day.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by 20 cents with a second order.
This was a bet that Microsoft (MSFT) will not trade below $165 by the April 24 option expiration day in only four trading days.
Here are the specific trades you need to exit this position:
Sell 23 April 24, 2020 (MSFT) $160 calls at………….......………$8.50
Buy to cover short 23 April 24, 2020 (MSFT) $165 calls at.....$4.60
Net Proceeds:……….……..…….………..……….................….….....$3.90
Loss: $4.40 - $3.90 = -$0.50
(23 X 100 X -$0.50) = -$1,150%.
The optics today look utterly different from when Bill Gates was roaming around the corridors in the Redmond, Washington headquarter and that is a good thing in 2018.
Current CEO Satya Nadella has turned this former legacy company into the 2nd largest cloud competitor to Amazon and then some.
Microsoft Azure is rapidly catching up to Amazon in the cloud space because of the Amazon-effect working in reverse. Companies don’t want to store proprietary data to Amazon’s server farm when they could possibly destroy them down the road. Microsoft is mainly a software company and gained the trust of many big companies especially retailers.
Microsoft is also on the vanguard of the gaming industry taking advantage of the young generation’s fear of outside activity. Xbox-related revenue is up 36% YOY, and its gaming division is a $10.3 billion per year business. Microsoft Azure grew 87% YOY last quarter.
To see how to enter this trade in your online platform, please look at the order ticket above, 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 Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
