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 - (ORCL) – SELL – TAKE PROFITS
SELL Oracle Corporation (ORCL) December 2019 $50-$53 in-the-money vertical BULL CALL spread at $2.75
Closing Trade
12-11-2019
expiration date: December 20, 2019
Portfolio weighting: 10%
Number of Contracts = 39 contracts
This was a bet that Oracle Corporation will not drop more than 4.5% in a window of 19 days and we are getting out of this one after a nice few day rally going into earnings.
Software stocks have been selling off indiscriminately on earnings because of cautious approach to software stock’s high multiples.
Oracle could get dragged into the mess as well and it reports earnings tomorrow December 12.
We are earning 48.1% of the total maximum profit by checking out here, but there is still a 65.46% chance to pocket the maximum profit if held until the December 20th expiration.
With the market overbought, it’s time to de-risk instead of waiting out for homeruns.
I can’t say that this is the type of tech stock that makes me dance in the streets but the risk/reward for this trade is favorable.
The company doesn’t grow top-line and is a legacy database software company headed by old hand Larry Ellison.
Even with the legacy status firmly tattooed on their foreheads, Oracle is a massive revenue scooper and that is in vogue right now.
They profited $11 billion on $39.5 billion of revenue in the past year and possess the type of balance sheet that is extra valuable right now in the eyes of traders.
They don’t risk losing their operational license like Uber in London and their CEO doesn’t take off for Africa for 6 months like Twitter’s Jack Dorsey.
Here are the specific trades you need to execute this position:
Sell 39 December 2019 (ORCL) $50 call at………….…..........……$6.30
Buy to cover short 39 December 2019 (ORCL) $53 call at..…….$3.55
Net Proceeds:……………......................………..…….………..…….....$2.75
Profit: $2.75 - $2.52 = $0.23
(39 X 100 X $0.23) = $897 or 8.97%
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 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.
