Tech Trade Alert - (FB) April 6, 2018 BUY
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 Trade Alert - (FB) - BUY
BUY the Facebook (FB) June, 2018 $130-$140 in-the-money vertical BULL CALL spread at $8.60 or best
Opening Trade
4-6-2018
expiration date: June 15, 2018
Portfolio weighting: 10%
Number of Contracts = 12 contracts
The real call here is that the NASDAQ has entered a well-defined trading range, from 6,600 to 7,600, where it will remain trapped for six months until the November midterm congressional elections. After that, we will rally 10% in yearend rally.
The deep in-the-money call spread strategy I employ is ideally suited to this kind of go nowhere market. While others traders are tearing their hair out, you'll be raking in the money every month as if you've just been adopted by a new rich uncle.
I am going to used today's fresh $100 billion Chinese import tariff induced selloff to add a position in Facebook (FB).
By the way, Facebook does no real business in China.
Mark Zuckerberg appears in front of the technophobes in congress this week, and I think this may market a low in the shares, which has fallen 18% off the top.
For the first time in ages, Facebook is now selling at a screaming discount to the main market, with a PE multiple of only 17X, compared to 19X, and 15X if you strip out cash on the balance sheet.
Facebook has in effect become another Apple (AAPL) in valuation terms. Facebook is now the cheapest high growth company in the entire market.
Fundamentals have not changed. Some 66% of advertisers say they will increase their spend over the next year.
Regulatory fear is overdone, and it is difficult to image in what form that such regulation would take. What, an (FB) friend tax on your account?
The worst case is that founder Mark Zuckerberg may have to undergo an unpleasant appearance in front of the technophobes in congress.
The company is growing at a compound 30% annual rate and is far and away the dominant player in it a deeply moated space. In other words, it is still a company whose shares you should die for.
Nevertheless, I am going to be very cautious here, buy the Facebook (FB) June, 2018 $130-$140 in-the-money vertical BULL CALL spread at $8.60 or best.
This is a bet that (FB) shares will not trade below $140 by the June 15 options expiration in 50 trading days.
Notice that I am being more cautious than usual with this trade, given the seasonality and the great height of the market. I am going for short duration, deep in the money, and a wide $10 spread.
Don't pay more than $9.00 for this position or you'll be chasing.
If you don't do options, close your eyes and buy Facebook shares outright.
Here are the specific trades you need to execute this position:
Buy 12 June 2018 (FB) $130 calls at..............$31.70
Sell short 12 June 2018 (FB) $140 calls at.......$23.10
Net Cost:.........................................................$8.60
Potential Profit: $10.00 - $8.60 = $1.40
(12 X 100 X $1.40) = $1,680 or 16.27% in 50 trading days.
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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
