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 - (IBB) - BUY
BUY the iShares NASDAQ Biotechnology ETF (IBB) July, 2018 $97-$100 in-the-money vertical BULL CALL spread at $2.60 or best
Opening Trade
6-4-2018
expiration date: July 20, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I am going to use the dip in the (IBB) this morning to get into the sector.
I have not traded in biotech shares in years because it has been such a terrible sector. However, looking at the long-term charts, the shares have forged a very solid bottom that goes all the way back to June 2017.
It has recently broken out of its recent range to the upside. That is worth trading against.
The five largest holdings of the (IBB) are Biogen (BIIB), Amgen (AMGN), Celgene (CELG), Gilead Science (GILD), and Vertex Pharmaceuticals (VRTX).
This is a notoriously volatile sector which has been tarred by the whole health care debate, unfairly so. In the meantime, the earnings growth of the individual companies has been quite good and valuations have fallen. So, it's worth a six-week shot.
To lose money on this trade (IBB) would have to drop below $100 by the July 20 options expiration, or down 10% from last week's all-time high.
Don't pay more than $2.75 for this position or you'll be chasing.
If you don't do options, close your eyes and buy (IBB) shares outright.
Here are the specific trades you need to execute this position:
Buy 38 July 2018 (IBB) $97 calls at................$12.60
Sell short 38 July 2018 (IBB) $100 calls at..........$10.00
Net Cost:......................................................$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(38 X 100 X $0.40) = $1,520 or 15.38% in 33 trading days.
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.