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 - PayPal Holdings, Inc. (PYPL)- SELL – TAKE PROFITS
SELL – TAKE PROFITS PayPal Holdings, Inc. (PYPL) April 2021 $230-$235 in-the-money vertical BULL call spread at $4.90
Closing Trade
4-7-2021
expiration date: April 16, 2021
Portfolio weighting: 10%
Number of Contracts = 22 contracts
This was a short-term bet that fintech company PayPal (PYPL) would stay above $235 by April 16th and the underlying stock has risen more than $10 in just 2 days meaning it’s time to take profits.
The risk/reward of holding this trade until expiration is unfavorable.
I’d be inclined to buy every dip for PYPL because I think it’s that good of tech company that is benefitting with the digitization of money.
PYPL is the future of digital payments.
PYPL consistently beat earnings and sales projections, stretching back to at least 2010. In that year, it earned a mere 29 cents per share. In 2019, the company reported EPS of $2.96 per share. For 2020, the firm's earnings grew 31% to $3.88 a share. Analysts expect the company's EPS to grow 18% in 2021 and another 26% in 2022.
The evolution of digital payments is a conviction “megatrend” that is here to stay.
Hold if you bought, my end-of-year target is $375.
Here are the specific trades you need to exit this position:
Sell to Close 22 April 2021 (PYPL) $230 calls at………….………$27.05
Buy to Close 22 April 2021 (PYPL) $235 calls at……...........…….$22.15
Net Proceeds:……………………..…….………..……............................$4.90
Profit: $4.90 - $4.40 = $.50
(22 X 100 X $.50) = $1,100 or 11.37%
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.
