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.
Trade Alert - (TSLA) – TAKE PROFITS
SELL the Tesla (TSLA) June 2019 $140-$150 in-the-money vertical BULL CALL spread at $9.98 or best
Closing Trade
6-13-2019
expiration date: June 21, 2019
Portfolio weighting: 10%
Number of Contracts = 11 contracts
We managed to capture a ballistic $45 move in Tesla shares in only 15 trading days. As a result, the value of our spread has soared from $8.80 to $10.00.
With only six trading days until the June 21 option expiration, the risk/reward of continuing is no longer favorable.
I am therefore selling the Tesla (TSLA) June 2019 $140-$150 in-the-money vertical BULL CALL spread at $9.98 or best. Put in a limit order at this price and leave it there until you get done. If you can’t come out at this price, just wait until the expiration and collect the full $10.00.
The only other reason to come out here is that if Tesla takes another dive, you can put it back on with an expiration one further month out. As I never tire of telling clients, you make the money on the volume of these trades, not hitting the occasional home run.
This was a bet that Tesla shares would not fall below the $150 strike price in 20 trading days by the June 21 option expiration. We put it on when the shares were in free fall and hedge funds were betting that the company would go under. But none of them have been visiting the factory, as I have. Funny how that works, how reality trumps speculation every time.
Here are the specific trades you need to execute to exit the position.
Sell 11 June 2019 (TSLA) $140 calls at………….........………$76.00
Buy to cover short 11 June 2019 (TSLA) $150 calls at…….$66.02
Net Proceeds:………………….......……….………..………….….....$9.98
Profit: $9.98 - $8.80 = $1.18
(11 X 100 X $1.18) = $1,298 or 13.40% in 15 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, 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 Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
