Trade Alert - (AAPL) December 10, 2018 - STOP LOSS
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 - (AAPL) – SELL-STOP LOSS
SELL the Apple (AAPL) December 2018 $160-$170 in-the-money vertical BULL CALL spread at $5.85 or best
Closing Trade - NOT FOR NEW SUBSCRIBERS
12-10-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts = 11 contracts
We got snake bit by our position in Apple this morning with a lower Chinese court action in favor of QUALCOMM (QCOM) banning iPhone imports.
Never mind that the ruling only applies to the older iPhone 11 operating system and that it will certainly get reversed by a higher court. With the stock moving down in a straight line for 2 ½ months now, investors are just not in a mood to give the company the benefit of the doubt.
I am therefore selling my position in the Apple (AAPL) December 2018 $160-$170 in-the-money vertical BULL CALL spread at $5.85 or best. The math for continuing with this spread position is no longer favorable.
Apple (AAPL) in particular has been pummeled mercilessly, besieged by analyst downgrades almost every day. Steve Jobs’ creation is now down a stunning $68, or $28.18% since September. It took Steve Job’s passing to generate a 40% drop seven years ago.
I’m sure both Apple and Warren Buffet are in there soaking up stock every day with the shares at a half-decade earnings multiple low and laughing all the way to the bank.
But here’s the problem with that logic. Fundamentals can be very dangerous in an out and out panic. As my friend John Maynard Keynes used to say, “Markets can remain irrational longer than you can remain liquid.” Apple and Warren Buffet can wait out this correction, but can you, especially if you are a trader? If the stock falls further they’ll just buy more.
The price earnings multiple now for Apple is only 12X against a market multiple of 15X. But too many times in my career I have seen the men in the white coats drag away crazy managers shouting “But the PE multiple was only 12.”
If you own the stock keep it. It is going much higher over the long term.
Here are the specific trades you need to execute this position:
Sell 11 December 2018 (AAPL) $160 calls at………….………$8.70
Buy to cover short 11 December 2018 (AAPL) $170 calls at….$2.85
Net Proceeds:……………………..…….………..………….….....$5.85
Loss: $8.90 -$5.85 = -$3.05
(11 X 100 X -$3.05) = -$3,355.
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.