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 - Microsoft Corporation (MSFT) – SELL – STOP LOSS
SELL STOP LOSS Microsoft Corporation (MSFT) December 2021 $325-$330 in-the-money vertical BULL call spread at $2.80
Closing Trade
12-3-2021
expiration date: December 17, 2021
Portfolio weighting: 10%
Number of Contracts = 26 contracts
This was a short-term trade that software company Microsoft (MSFT) would stay above the strike price of $330 in17 days.
I cut down risk to one trade in December to guard against the omicron concern.
I believed that the market would give MSFT a pass because it’s the best of breed and even if MSFT hasn’t dropped 40% like DocuSign (DOCU), MSFT is getting dragged down by the wider market.
I would cut exposure to the minimum right now as the omicron selloff wipes out the weak hands.
We will take a loss on this position, and I am validated for not betting the ranch after we had an awfully good last month trading.
Microsoft's dramatic growth over the past seven years was led by the expansion of its cloud services, which include Azure, Office 365, Dynamics, LinkedIn, and its other cloud-based software. The company reports the growth of these businesses together as the "Microsoft Cloud."
Microsoft Cloud's revenue rose 36% year over year to $20.7 billion during the first quarter, which matched its 36% growth rate in the fourth quarter.
If you don’t do options, buy and hold the stock long term.
Here are the specific trades you need to execute this position:
Sell to Close 26 December 2021 (MSFT) $325 calls at………….………$7.50
Buy to Close 26 December 2021 (MSFT) $330 calls at……........…….$4.70
Net Proceeds:……………………..…….………..…...........................….....$2.80
Loss: $3.80 – 2.80 = $$1.00
(26 X 100 X $1.00) = $2,600 or 26.92%
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.
