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 - Micron Technology, Inc. (MU) – TAKE PROFITS
SELL – Micron Technology, Inc. (MU) February 2021 $65-$70 in-the-money vertical BULL CALL spread at $4.58
Closing Trade
1-28-2021
expiration date: February 19, 2021
Portfolio weighting: 10%
Number of Contracts = 23 contracts
Micron (MU) is a 5G play and this was a trade that the underlying stock would stay above $70 by February 19th expiration and we are cutting it short after yesterday’s huge down day.
MU was up over $85 just a few days ago and the downward price action is concerning and now that it’s up over 6% today, I will book a modest profit of 8.3% on this trade and live to fight another day.
A drop from $85 to $75 is a 12% correction in this specific name and a definite red flag in the trading world.
What saved us was the initial ride up to $85 which happened right after we bought the call spread.
Congratulations and on to the next trade as we book our second straight call spread after we booked profits on salesforce.com (CRM).
Why do we like MU?
2021 could turn out to be a blockbuster year for Micron's mobile business, as sales of 5G smartphones are expected to explode.
The chipmaker estimates that 500 million 5G smartphones could be consumed in the new year, as compared to 200 million units in 2020.
Micron is strategically placed to take advantage of this accelerating growth.
Micron CEO Sanjay Mehrotra boasted that Micron “achieved a record number of design wins in fiscal Q4.”
Micron is poised to win in the 5G era as a supplier to all the major smartphone manufacturers, with an outstanding portfolio of industry-leading low power DRAM and managed NAND solutions.
Here are the specific trades you need to exit this position:
Sell 23 February 2021 (MU) $65 calls at………..............….….……$15.10
Buy to Cover Short 23 February 2021 (MU) $70 calls at………….$10.52
Net Proceeds:………….......................…………..…….………..…….......$4.58
Profit: $4.58 - $4.22 = $.36
(23 X 100 X $.36) = $828
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 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.
