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 - (V) –TAKE PROFITS
SELL the Visa (V) MAY 2021 $195-$205 in-the-money vertical Bull Call spread at $9.90 or best
Closing Trade
5-10-2021
expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 12 contracts
The last week has seen a positively ballistic move in the credit card companies, especially Visa (V). With 92.30% of the maximum potential profit in hand, the risk reward of continuing is no longer favorable.
I’d rather have the extra cash to roll into a better position for the June expiration.
I am therefore selling the Visa (V) May 2021 $195-$205 in-the-money vertical Bull Call spread at $9.90 or best.
By coming out here you get to take home $1,440, or 14.36% in 19 trading days. Well done and on to the next trade!
This position had huge downside protection from downside support by the 200-day moving average at $203.88.
Visa is the quality play in the credit card area, recently growing at the expense of Master Card and American Express. The world is rushing into an all-digital economy and (V) is a major beneficiary.
They also have profited hugely from the move to “touchless” transactions where people are afraid of using physical cash for fear of contracting Covid-19.
This cycle of covid-19 infections has peaked out and has declined by 80%, at least for the short term.
As a result, I believe the core long FANG trade is long overdue for a break. Instead, I think we are about to witness a major rotation into domestic economic “recovery” stocks like Visa. Stocks will keep going up, but the leadership will change. Bonds and gold are also due for profit-taking.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done cancel your order and increase your bid by 10 cents with a second order.
This was a bet that Visa (V) would not trade below $205 by the May 21 option expiration day in 28 trading days.
Here are the specific trades you need to exit this position:
Sell 12 May 2021 (V) $195 calls at………................….………$31.00
Buy to cover short 12 May 2021 (V) $205 calls at……….…..$21.10
Net Proceeds:…………….....………..…….………..………….….....$9.90
Profit: $9.90 - $8.70 = $1.20
(12 X 100 X $1.20) = $1,440, or 14.36% in 19 trading days.
If you are uncertain about 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.
