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) - TAKE PROFITS
SELL PayPal Holdings, Inc. (PYPL) June 2021 $235-$240 in-the-money vertical BULL call spread at $4.90
Closing Trade
6-2-2021
expiration date: June 18, 2021
Portfolio weighting: 10%
Number of Contracts = 22 contracts
This was a short-term bet that fintech company PayPal (PYPL) would stay above $240 before June 18th expiration.
I executed a bull call spread in PYPL in April that was profitable and I liked the chart set up in PYPL after a bout of volatility caused by perceived inflation scares. Many high quality tech names have experienced multiple contractions lately making them more affordable.
At a technical level, PYPL had support at the 50-day moving average and after coming back down from $310, I believe PYPL is highly tradable from the long side in the short-term.
So after opening up strong this morning, I will take profits as the risk/reward of holding the trade until expiration does not favor our side.
I am also inclined to re-enter into PYPL from the long side on the next dip.
I was also looking at Coinbase (COIN) from the long side as well and believe that any 3-5% dip is a good buying opportunity.
PYPL along with SQ is my favorite fintech play and they are clearly 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.
It’s time to add a little risk as we overcome a torrent of inflation scare news to settle into a post earnings gray space. Lastly, PYPL seemed to generate higher gains when the headlines are flooded with crypto news which we have been receiving a steady dose of.
Buy this stock and hold, my end-of-year target is $375.
Here are the specific trades you need to exit this position:
Sell to Close 22 June 2021 (PYPL) $235 calls at.….………$29.78
Buy to Close 22 June 2021 (PYPL) $240 calls at………….$24.88
Net Proceeds:……………………..............…….………..…….....$4.90
Profit: $4.90 - $4.40 = $.50
(22 X 100 X $.50) = $1,100 or 11.36%
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.
