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 - (AMZN) - BUY
BUY the Amazon (AMZN) March 2020 $1,350-$1,400 in-the-money vertical BULL CALL spread at $42.00 or best
Opening Trade
3-13-2019
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 2 contracts
I am going to step my toe back in the market with Amazon, which has held up remarkably well.
The net effect of the Coronavirus is to immediately drive a much larger share of commerce online, with Amazon taking the lion’s share. It is also the only place where you can buy a ten-pound bag of rice. The legacy stores are all out of it.
With the Volatility Index (VIX) at an incredible $78, the risk/reward for a very deep in-the-money vertical call spread on the highest quality names is very favorable.
I believe that Amazon (AMZN) shares are oversold in the extreme and that there is some nice cherry-picking to be had. This is a stock that you want to hide behind the radiator and keep forever.
I am therefore buying the Amazon (AMZN) March 2020 $1,350-$1,400 in-the-money vertical BULL CALL spread at $42.00 or best.
Don’t pay more than $47.00 or you’ll be chasing.
If you don’t do options, buy the stock outright for an extreme oversold bounce.
This is a bet that Amazon shares will NOT fall below $1,400 by the March 20 option expiration date in 5 trading days. In other words, it is a bet that (AMZN) won’t fall by more than 313 points by next Friday. Yes, this is 22% very deep-in-the-money call spread with only a week until expiration.
Here are the specific trades you need to execute this position:
Buy 2 March 2020 (AMZN) $1,350 calls at…….....………$372.00
Sell short 2 March 2020 (AMZN) $1,400 calls at……….$330.00
Net Cost:…………….............…………….…………..…….….....$42.00
Potential Profit: $50.00 - $42.00 = $8.00
(2 X 100 X $8.00) = $1,600 or 19.05% in 5 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.
