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) –SELL-STOP LOSS
SELL the Visa (V) November 2020 $180-$185 in-the-money vertical Bull Call spread at $2.40 or best
Closing Trade
10-28-2020
expiration date: November 20, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
In a mere two days, the prospect of a global economic lockdown like we saw in March is rearing it’s ugly head. All support on the charts has been smashed, sending stocks into free-fall. Credit card use will plunge.
I am therefore selling the Visa (V) November 2020 $180-$185 in-the-money vertical Bull Call spread at $2.40 or best.
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.
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 lower your offer by 10 cents with a second order.
This is a bet that Visa (V) would not trade below $185.00 by the November 20 option expiration day.
Here are the specific trades you need to exit this position:
Sell 23 November 2020 (V) $180 calls at……......…….………$8.00
Buy to cover short 23 November 2020 (V) $185 calls at…..$5.60
Net Proceeds:…….....………………..…….………..………….….....$2.40
Loss: $4.30 - $2.40 = -$1.90
(23 X 100 X -$1.90) = -$4,370, or 44.18%.
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 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.
