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 - Shopify Inc. (SHOP) – STOP LOSS
SELL the Shopify Inc. (SHOP) June 2022 $395-405 in-the-money vertical BEAR PUT spread at $6.20
Closing Trade
6-8-2022
expiration date: June 17, 2022
Portfolio weighting: 10%
Number of Contracts = 13 contracts
This was a short-term tactical trade in Shopify Inc. (SHOP) that SHOP wouldn’t rise above $395 before June 17th and the trade has gone against us from day 1.
This trade would have been profitable based on the overall price action of the Nasdaq but the day after we executed this trade, SHOP announced a 10:1 stock split and it’s been off to the races since then.
Something like that is similar to a black swan event in the short-term trading environment as it invites the bulls to take the stock higher.
The stock finished that day up 5% when the broader market was flat. Today, the Nasdaq is down .8% but SHOP refuses to participate in any downside movement.
The momentum as a result of the bullish stock split is too much for us to overcome and we need to initiate a stop loss.
Risk management is the order of the day.
Here are the specific trades you need to exit this position:
Sell to Close 13 June 2022 (SHOP) $405 puts at………….………$30.50
Buy to Close 13 June 2022 (SHOP) $395 puts at……….........….$24.30
Net Proceeds:……………………..…….......................………..…….....$6.20
Loss: $8.40 - $6.20 = $2.20
(13 X 100 X $2.20) = $2,860 or 26.19%
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.
