Trade Alert - (FB) January 30, 2020

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 - Facebook, Inc. (FB) – BUY

BUY Facebook, Inc. (FB) February 2020 $190-$200 in-the-money vertical BULL call spread at $8.42

Opening Trade

1-30-2020

expiration date: February 21, 2020

Portfolio weighting: 10%

Number of Contracts = 11 contracts

This is a short-term trade that Facebook (FB) will hold $200 after an earnings report showing that expenses have gone up.

I hate the CEO but the businesses are a powerful specimen.

Shares are down 7% this morning combined with the spread of the coronavirus in China have made this a demonstrably negative day.

Remember that Facebook beat on every single metric:

Revenue: $21.08 billion vs. $20.89 billion expected, +25% YoY

Earnings per share: $2.56 vs. $2.53 expected

Daily Active Users: 1.66 billion vs. 1.65 billion expected, +9% YoY

Monthly Active Users: 2.50 billion vs. 2.49 billion expected, +8% YoY

Avg. revenue per user: $8.52 vs. $8.38 expected

Markets are volatile today, please use caution by only executing limit orders.

If you don’t do options, stand aside.

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

Buy 11 February 2020 (FB) $190 call at…….…….………$19.17

Sell short 11 February 2020 (FB) $200 call at………….$10.75

Net Cost:……………………..…….………..…….....................$8.42

Potential Profit: $10.00 - $8.42 = $1.56

(11 X 100 X $1.58) = $1,738 or 17.38% in 23 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 on “How to Execute a Vertical Bull Call Spread” 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.

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