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 – STOP LOSS
SELL PayPal Holdings, Inc. (PYPL) March 2020 $110-$115 vertical BULL call spread at $3.10
Closing Trade
2-25-2020
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
Yesterday was a massive down day as the Nasdaq dropped off a cliff – traders taking profits.
The Nasdaq opened up around 1% with pre-market trading strong, but has cascaded lower intraday and we are going to 100% cash.
The tech markets are starting to price in massive contagion that will continue to spread and revenue guidance will get trampled on.This is a giant flight to safety trade going on right now.
Markets are extremely volatile and it is important to use limit orders as option prices are whipping around.
PayPal is one of my favorite fintech companies and they should be one of yours too.
They are masters at trotting out 20% growth on almost every quarterly earnings report and have growth drivers such as Venmo.
Here are the specific trades you need to execute this position:
Sell 23 March 2020 (PYPL) $110 call at………..............….………$6.50
Buy to cover short 23 March 2020 (PYPL) $115 call at………….$3.40
Net Proceeds:…………………..........................…….………..…….....$3.10
Loss: $4.35 - $3.10 = $1.25
(23 X 100 X $1.25) = -$2,875 or -28.75%
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.
Things to Keep in Mind
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.
Remember, these are ballpark prices at best. After the alerts go out, prices can be all over the map.
