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 - Peloton Interactive, Inc. (PTON) – SELL – TAKE PROFITS
SELL Peloton Interactive, Inc. (PTON) October 2020 $60-$65 in-the-money vertical BULL call spread at $4.78
Closing Trade
9-15-2020
expiration date: October 16, 2020
Portfolio weighting: 10%
Number of Contracts = 24 contracts
I am taking profits in our call spread on Peloton Interactive, Inc. (PTON) after it opened up 3% this morning after gaining 2% at the back end of yesterday’s trading day.
This stock is highly volatile and I am locking in profits before the stock goes haywire. Traders who are dabbling in volatile stocks should set limit orders to front-run these trade alerts.
Yes, we are not harvesting maximum profits but since we are at Himalayan highs, hedged positions and risk control is the order of the day.
Tech shares are likely to grind higher as the Fed has pledged their unconditional support to the broader market no matter how much collateral damage that means for parts of the economy.
Why invest in Pelton?
The tech firm reported fiscal fourth-quarter earnings results that blew away all expectations, as the ongoing COVID-19 pandemic has created a surge in demand for home exercise solutions. Revenue skyrocketed 172% to $607.1 million, crushing both the consensus estimate of $580 million and the company's own guidance. Connected Fitness subscribers more than doubled to 1.09 million, and Digital memberships more than tripled to nearly 320,000.
That all led to the company's first profitable quarter, with Peloton posting net income of $89.1 million, or $0.27 per share. However, management acknowledged on the conference call with analysts that Peloton is struggling to keep up with demand, but that's a very good problem to have.
Here are the specific trades you need to exit this position:
Sell 24 October 2020 (PTON) $60 calls at………..............….………$25.35
Buy to cover short 24 October 2020 (PTON) $65 calls at………….$20.57
Net Proceeds:……………………..…..........................….………..…….....$4.78
Profit: $4.78 - $4.00 = $.78
(24 X 100 X $.78) = $1,872 or 18.72%
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.