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) - STOP LOSS
SELL PayPal Holdings, Inc. (PYPL) November 2021 $215-$220 in-the-money vertical BULL call spread at $3.75
Closing Trade
11-8-2021
expiration date: November 19, 2021
Portfolio weighting: 10%
Number of Contracts = 23 contracts
This was a short-term bet that fintech company PayPal (PYPL) would stay above $220 by Nov 19th expiration.
This was the third time this year I played PYPL from the long side after two days of weakness and the first time I will take a loss.
This trade was highly frustrating as the underlying stock went against us from the start and every rally was sold after. Therefore, I am using this 2% up move this morning to take a modest loss which is the right thing to do considering earnings come out tomorrow and a bad guide could see us take a major loss on this position.
Out of the 6 call spreads open now, this is the only position that isn’t favorable at this moment in time.
We are on track to have a highly positive month and we are cutting risk here by not taking a chance on tomorrow's earnings rhetoric.
Why did we buy PYPL?
The stock nosedived on news that PYPL was exploring a $45 billion acquisition of social media company Pinterest Inc., in what could have been the biggest technology deal of the year and move the payments company closer to its ambitions of becoming a “super app.”
PYPL then refuted these rumors and the market thought that was even worse news than paying up for PINS and we have caught the brunt of it. Time to cut losses here.
Here are the specific trades you need to exit this position:
Sell to Close 23 November 2021 (PYPL) $215 calls at………….………$18.45
Buy to Close 23 November 2021 (PYPL) $220 calls at….......……….$14.70
Net Proceeds:…………………….............................…….…….…..…….....$3.75
Loss: $4.20 - $3.75 = $.45
(23 X 100 X $.45) = $1,035 or 10.71%
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.
