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 - Stitch Fix, Inc. (SFIX) – BUY
BUY Stitch Fix, Inc. (SFIX) April 2020 $15-$18 in-the-money vertical BEAR put spread at $2.55
Opening Trade
3-30-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 38 contracts
This is a short-term trade that online clothing company Stich Fix won’t rise above $15 in 19 days.
Volatility is still abnormally high and the tech shares have retraced from the “sell anything at any price” storm.
I would recommend taking profits on any substantial down move on SFIX.
Let’s do some raw, back-of-the-envelop calculations. Congress has just passed the largest stimulus package in history, some $2 trillion. If Morgan Stanley is right and the US is about to lose 30% of its economic growth on an annualized basis, that means the GDP is about to drop from $21.4 trillion to $19.8 trillion. Get two quarters like this and we fall back to $18.2 trillion, or to the 2016 levels.
The garment industry worldwide is facing mass cancelations from buyers and factories in Asia are confronting widespread job loss.
This is the canary in the coal mine for clothing tech and even though SFIX has some fancy algorithms matching bespoke clothing wardrobes with the styles and tastes of the customer, this service is literally the last thing people need when 1/3 of the country is in lockdown.
The recent price action in SFIX shares has been poor with any little bounce met with selling, the broader Nasdaq index is up 2% this morning but SFIX is down – indeed a bad omen for the next “rip your face off” sell-off.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES AND DO NOT BUY THE STOCK.
Here are the specific trades you need to execute this position:
Buy 38 April 2020 (SFIX) $18 put at………….………$5.40
Sell short 38 April 2020 (SFIX) $15 put at………….$2.85
Net Cost:………….........…………..…….………..…….....$2.55
Potential Profit: $3.00 - $2.55 = $.45
(38 X 100 X $.45) = $1,710 or 17.10% in 19 days
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 at
http://www.madhedgefundtrader.com/ltt-vbpds/
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.
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.
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.
