Trade Alert - (CRM) January 11, 2021 - BUY

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.

 

Tech Alert - salesforce.com, inc. (CRM) - BUY

BUY salesforce.com, inc. (CRM) February 2021 $195-$200 in-the-money vertical BULL call spread at $4.13

Opening Trade

1-11-2021

expiration date: February 19, 2021

Portfolio weighting: 10%

Number of Contracts = 24 contracts

This is a short-term bet that Salesforce will stay above $200 in the next 40 days.

It’s time to revert to high quality in a tech sector that is not cheap.

We have around 9% of cushion of the underlying stock to protect against downside moves.

If the underlying stock drops below $200, cut your losses.

This cloud stock has been one of my favorite Silicon Valley trades and the stock is cheaper after the announcement of the Slack acquisition which caused a slew of analyst downgrades.

Why is this a good tech story?

Salesforce's cloud-based customer relationship management (CRM) service controlled 18.4% of the global CRM market last year, according to IDC.

Salesforce leverages that leading position to tether companies to its other e-commerce, marketing, and analytics services.

Those services help companies streamline their businesses, outsource operations, automate repetitive tasks, and reduce their overall dependence on human employees.

In short, companies turn to Salesforce when they need to cut costs, during both economic expansions and contractions.

That's why Salesforce's business thrived throughout the pandemic. Its revenue rose 29% to $17.1 billion in fiscal 2020, then grew another 34% year over year to $15.4 billion in the first nine months of 2021.

It’s a time to add a little risk and with some big tech names in hot water like social media cash cow Facebook and its upstart cousin Twitter, it’s time to look in a “safer” area of Silicon Valley for a trade.

If you don’t do options, avoid for now.

Here are the specific trades you need to execute this position:

Buy 24 February 2021 (CRM) $195 calls at………..….………$27.35

Sell short 24 February 2021 (CRM) $200 calls at….……….$23.22

Net Cost:……………………..…….……….........................…….....$4.13

Potential Profit: $5 - $4.13 = $.87

(24 X 100 X $.87) = $2,088 or 21.06% in 40 days

 

To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.

If you are uncertain on how to execute an options spread, please watch my training video by clicking here.

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 on expiration months farther out.

Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.