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) - BUY
BUY the Microsoft (MSFT) September 2019 $115-$120 in-the-money vertical BULL CALL spread at $4.50 or best
Opening Trade
8-23-2019
expiration date: September 20, 2019
Portfolio weighting: 10%
Number of Contracts = 22 contracts
With the Volatility Index (VIX) over $20, the risk/reward for a very deep in-the-money vertical call spread in the highest quality names is extremely favorable, and you don’t get any better quality than Microsoft (MSFT).
Adding this position during a horrific, 650-point swan dive inspired by a presidential Tweet is also a plus. He escalated the trade war, ordered all American companies out of China, and insulted his appointed Fed governor, all in just 340 characters. Well done, Mr. President!
In addition, this particular combination of strike prices gives you huge support at the 200-day moving average.
I believe that Microsoft (MSFT) shares are oversold and that there is some nice cherry picking to be had here. This is a stock that you want to hide behind the radiator and keep forever.
I am therefore buying the Microsoft (MSFT) September 2019 $115-$120 in-the-money vertical BULL CALL spread at $4.50 or best.
Don’t pay more than $4.70 or you’ll be chasing.
If you don’t do options, buy the stock outright for an extreme oversold bounce.
This is a bet that Microsoft shares will NOT fall below $120 by the September 20 option expiration date in 18 trading days. In other words, it is a bet that (MSFT) won’t fall by more than $14 in less than four weeks.
This is also a bet that we are not already in a recession, which I believe is still at least 12 months off.
Here are the specific trades you need to execute this position:
Buy 22 September 2019 (MSFT) $115 calls at…….…..…$20.00
Sell short22 September 2019 (MSFT) $120 calls at…….$15.50
Net Cost:……...........…………………….…………..…..….….....$4.50
Potential Profit: $5.00 - $4.50 = $0.50
(22 X 100 X $0.50) = $1,100 or 11.11% in 19 trading days.
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 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.
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.
You must be logged into your account to view the video.
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.
