Trade Alert - (MSFT) June 19, 2018 TAKE PROFITS
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 - (MSFT) - TAKE PROFITS
SELL the Microsoft (MSFT)?July, 2018 $90-$95 in-the-money vertical BULL CALL spread at $4.35 or best
Closing Trade
6-19-2018
expiration date: July 20, 2018
Portfolio weighting: 10%
Number of Contracts = 25 contracts
Today gives a great example of why you trade option call spreads. They provide tremendous downside protection on melt down days like this one. For not only did you go into today very deep in-the-money, you also had a short position through one leg of the spread.
Given the greatly heightened risk backdrop delivered by the escalation of the trade war with China I am going to continue to cut positions. China generated 50% of all global GDP growth over the last ten years. Apple sells more phones in China than at home, and General Motors (GM) sell more cars in the Middle Kingdom than in the US.
I am therefore going to sell the Microsoft (MSFT)?July?2018 $90-$95 in-the-money vertical BULL CALL spread at $4.35 or best.
Buy coming out here you can claim a profit of $8.75%, or $875 in 12 trading days. It's not as much as I wanted, put in this environment you take what you can. No one ever got fired for taking a profit. Better to raise cash here and live to fight another day.
If you own Microsoft stock keep it. Long term it's still a great company.
Here are the specific trades you need to execute this position:
Sell 25 July 2018 (MSFT) $90 calls at................$10.25
Buy to cover short 25 July 2018 (MSFT) $95 calls at..........$5.90
Net Proceeds:.......................................................
Profit: $4.35 - $4.00 = $0.35
(25 X 100 X $0.35) = $875 or 8.75% in 12 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.