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 - NVIDIA Corporation (NVDA) – TAKE PROFITS
SELL the NVIDIA Corporation (NVDA) March 2021 $590-$595 in-the-money vertical Bear put spread at $4.98
Closing Trade
3-4-2021
expiration date: March 19, 2021
Portfolio weighting: 10%
Number of Contracts = 25 contracts
First, we executed a short-term bet that Nvidia (NVDA) would stay above $500 by the March expiration and we issued a stop loss, but we managed to shoot out an NVDA put spread right before NVDA collapsed.
I still love this company but we are in the midst of a tech growth selloff and the volatility is crushing the best of growth tech like NVDA.
Why did we execute this NVDA put spread?
I was surprised by the terrible price action in NVDA. It was certainly highly disappointing.
And it was a worrying sign and in light of executing two other call spreads on Amazon and Netflix, which are doing much better, I threw on an NVDA hedge to protect against the downside before the situation got out of hand.
Volatile stocks can go against investors quickly.
I am now just left with upside bets on AMZN and NFLX, but will look to mitigate losses if the selling continues.
Do not use Market Orders under any condition. The market makers will fleece you on the spread if you do. Fast-moving markets mean fast-moving option prices.
Here are the specific trades you need to exit this position:
Sell to Close 25 March 2021 (NVDA) $595 puts at………….….……$100.80
Buy to Close 25 March 2021 (NVDA) $590 puts at…............……….$95.82
Net Proceeds:……………………..…….………..............................…….....$4.98
Profit: $4.98 - $4 = $.98
(25 X 100 X $.98) = $2,450 or 24.50
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.
