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 - Wayfair Inc. (W) – TAKE PROFITS
SELL the Wayfair Inc. (W) January 2023 $50-$55 in-the-money vertical BEAR PUT spread at $4.70
Closing Trade
12-15-2022
expiration date: January 20, 2023
Portfolio weighting: 10%
Number of Contracts = 23 contracts
This was a tactical trade in furniture e-seller Wayfair Inc. (W) that W would not rise above $50 in the next 38 days.
I faded a big pop in W shares.
We were massively overbought in the short-term and I believed W would retrace to the mean from here.
It turned out that I was absolutely correct with W getting smashed today down over 10-11% this morning.
Why did I execute this trade?
In the short term, much of the bullish news was priced into tech growth shares. I didn’t see where the incremental buyer would from in W shares.
Fed Chairman Jerome Powell suggested that the battle against inflation isn’t won yet. The Fed reminded the market that it has much more work to do and that a soft CPI report does not do that much to shift what it will need to do in the months ahead.
We are taking profits in W here after another successful tech trade alert.
Here are the specific trades you need to exit this position:
Sell to Close 23 January 2023 (W) $55 puts at………….………$18.50
Buy to Close 23 January 2023 (W) $50 puts at………........….$13.80
Net Proceeds:……………………..…….………..…….......................$4.70
Profit: $4.70 - $4.30 = $.40
(23 X 100 X $.40) = $920 or 9.30%
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.
