Trade Alert - (BBY) August 14, 2019 - SELL-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 - (BBY) – TAKE PROFITS
SELL the Best Buy Co. (BBY) September 2019 $80.00-$82.50 in-the-money vertical BEAR PUT spread at $2.35 or best
Closing Trade
8-14-2019
expiration date: September 20, 2019
Portfolio weighting: 10%
Number of Contracts = 50 contracts
I like making 17.5%, or $1,750 in one day. So, with the Dow Average off a monster 620 points, and Best Buy (BBY) down an eye-popping 6.72% I m going to take profits here.
You can blame Macy’s (M), which announced horrific earnings this morning that took its own stock down 17% and decimated the entire sector. If Macy’s can’t make it, no one can.
As I thought, yesterday’s sudden 550-point gap up in the Dow Average was just a temporary over reaction to news this morning that the US may, or may not, delay SOME of the new Chinese tariffs by 75 days. There is no sudden snap back in the economy going on, but rather, a grinding slowdown.
The president has completely lost the confidence of the stock market. And like virginity, once lost, it is really difficult to recover. I believe that the administration will continue to hammer retailers for the rest of this year with their misguided and sophomoric trade policy. Virtually everything Best Buy sells is imported.
I am therefore selling the Best Buy Co. (BBY) September 2019 $80.00-$82.50 in-the-money vertical BEAR PUT spread at $2.35 or best. I want to have cash the next time we get a Tweet and another out-of-the-blue 500-point rally.
By coming out here, you get to book 70% of the maximum potential profit in a single day.
I should caution you that a small company in an unpopular sector will have relatively illiquid options. Get these as low as you can, but if you can’t get them, wait for the next Trade Alert. There will be lots with this elevated volatility.
This was a bet that Best Buy (BBY) would not trade above $80.00 by the September 20 option expiration in 22 trading days. It was also bet that the (BBY), a heavily beleaguered retailer, will not rise to a new one year high during this period. That worked. I will continue to sell short retailers until they are all gone.
If you don’t do options, stand aside. This is a very short-term options play only.
Here are the specific trades you need to exit this position:
Sell 50 September 2019 (BBY) $82.50 puts at………......….………$16.50
Buy to cover short 50 September 2019 (BBY) $80.00 puts at....$14.15
Net Proceeds:……………………………...………..………….…................$2.35
Profit: $2.35 - $2.00 = $0.35
(50 X 100 X $0.35) = $1,750 or 17.50%% in 1 trading day.
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.
