Trade Alert - (FB) April 24, 2020 - 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 - (FB) – SELL-STOP LOSS
SELL the Facebook (FB) May 2020 $190-$200 in-the-money vertical Bear Put spread at $7.40 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
4-24-2020
expiration date: May 15, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
With 15 days to expiration, we have gotten too close to our lower strike price in this put spread. You need a big safety cushion in this market to avoid overnight blow-ups, and the recent rally in the market has whittled down our safety margin too much. The risk/reward of continuing is no longer favorable.
As much as I love Facebook for the long term, I didn’t believe that we were going to a new all-time high in the near future. While traffic (costs) on (FB) have rocketed, advertising revenues have dropped by at least a third. Going into a Great Depression, the last thing in the world you want to own is an advertising company, where everyone is chopping ad budgets like crazy.
I am therefore selling the Facebook (FB) May 2020 $190-$200 in-the-money vertical Bear Put spread at $7.40 or best.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done cancel your order and lower your offer by 20 cents with a second order.
This was a bet that Facebook (FB) will not trade above $190 by the May 15 option expiration day in 27 trading days.
Here are the specific trades you need to exit this position:
Sell 12 May 2020 (FB) $200 puts at………….…......……$20.00
Buy to cover 12 May 2020 (FB) $190 puts at…………...$12.60
Net Proceeds:……………...…….………..…......…….….….....$7.40
Loss: $8.40 - $7.40 = -$1.00
(12 X 100 X -$1.00) = -$1,200.
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.
