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 – Zoom Video Communications, Inc. (ZM) – STOP LOSS
SELL Zoom Video Communications, Inc. (ZM) February 2023 $83-$88 in-the-money vertical BEAR PUT spread at $3.80
Closing Trade
2-7-2023
expiration date: February 17, 2023
Portfolio weighting: 10%
Number of Contracts = 23 contracts
Unannounced Zoom (ZM) just fired 15% of staff causing a sharp short squeeze in the stock.
The stock surged as less staff means less expenses which means more money for staff to try to fix its mediocre business.
Our strike price was $83 and a move like that justifies running for the exits.
Firing 1,300 staff members is clearly a sign that ZM has to do more with its products and is a sign of revenue slowdown which isn’t great for the company.
In the short term, the stock lights on fire and we close our position.
Here are the specific trades you need to exit this position:
Sell to Close 23 February 2023 (ZM) $88 puts at………….………$7.80
Buy to Close 23 February 2023 (ZM) $83 puts at……........…….$4.00
Net Proceeds:……………………..…….………......................…….....$3.80
Loss: $4.35 - $3.80 = $.55
(23 X 100 X $.55) = $1,265
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.
