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 - Twitter, Inc. (TWTR) – SELL – TAKE PROFITS
SELL Twitter, Inc. (TWTR) December 2019 $24-$27 in-the-money vertical BULL CALL spread at $2.95 or best
Closing Trade
12-2-2019
expiration date: December 20, 2019
Portfolio weighting: 10%
Number of Contracts = 37 contracts
We are harvesting 86.5% of maximum profits here or if you want the last 5 cents, you can run it into expiration.
I want some added dry powder to find some new trades going into the yearend.
Also, CEO of Twitter Jack Dorsey just announced he is taking off to Africa for 3-6 months next year, there could be more bad news in this one.
The tech melt up has been ferocious with mid-cap names like Autodesk, Workday joining the big boys like Adobe and Apple.
We have been in a goldilocks type of tech market with earnings better than first thought and the American economy not as bad as people thought.
Combine that with geopolitics that isn’t as toxic as people thought and asset managers fear of losing out on the Santa Claus rally, tech has done well going into year end.
I have been effectively long all the way through putting on trades with companies that guide weak and finding good entry points on subsequent sell-offs.
For the last two years, Twitter’s earnings have grown faster than price. Since 2017, earnings have grown 11% per year and the market is up only 7% per year. What’s happening now is a catch-up in stock prices.
Twitter cratered 20% on its earnings report two weeks ago because of weak guidance and a top line miss giving us a great entry point and we took it.
The reasons were largely technical adjusting to the new era of tighter data privacy. The stock got ahead of itself but the revaluation gave us a great entry point into the second best social media company that turns a profit.
The company's average daily active users reached 145 million, beating analyst expectations of 141 million rising 17% from the year-ago period and I don’t see anti-trust issues blowing up in their face before Christmas.
Here are the specific trades you need to execute this position:
Sell 37 December 2019 (TWTR) $24 call at………….........………$6.60
Buy to cover short 37 December 2019 (TWTR) $27 call at…….$3.65
Net proceeds:……………………..…….……….........................….....$2.95
Profit: $2.95 - $2.64 = $.31
(37 X 100 X $.31) = $1,147 or 11.47
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.
