Trade Alert - (AAPL) February 5, 2019 - SELL-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) February 2019 $175-$180 in-the-money vertical Bear Put spread at $3.70 or best
Closing Trade
2-5-2019
expiration date: February 15, 2019
Portfolio weighting: 10%
Number of Contracts = 22 contracts
As we approach our lower strike price in this spread, the risk/reward in this position has risen dramatically. It looks like we are getting the mirror image of the December meltdown where stocks rise every day. This has generated our first loss of the year.
Since it is better to dig out of a small hole than a big one, I am therefore selling the Apple (AAPL) February 2019 $175-$180 in-the-money vertical BEAR PUT spread at $3.70 or best. If you can’t get done at $3.70 then walk DOWN your limit ten cents at a time quickly until it is.
I am still confident that this position will expire at its maximum profit point of $5.00. Trees can’t grow to the sky and the Mad Hedge Market Timing Index at 63 is entering severe overbought territory. However, I am not willing to get there via a substantial loss and put at risk the major profits we earned in January.
This was a bet that Apple would not rise above the $175 strike price by the February 15 options expiration date in 12 trading days. We have only 8 trading days left.
Here are the specific trades you need to exit this position:
Sell 22 February 2019 (AAPL) $180 puts at………….………$7.00
Buy to cover short 22 February 2019 (AAPL) $175 puts at….$3.30
Net Cost:……………………..…….………..………….….....$3.70
Loss: $4.40 - $3.70 = -$0.70
(22 X 100 X -$0.70) = $1,540.
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.