Trade Alert - (GRUB) April 9, 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.
Tech Alert - Grubhub Inc. (GRUB) – SELL – STOP LOSS
SELL Grubhub Inc. (GRUB) April 2020 $47-$50 in-the-money vertical BEAR put spread at $2.00
Closing Trade
4-9-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 39 contracts
This was a short-term trade that Grubhub wouldn’t rise above $47 before the April 17 expiration date and the price action has been nothing short of awful.
The stock is now up 35% since bottoming and spiked up 7% today before retracing down to 5.5% outperforming the broader Nasdaq market.
There is way too much optimism in shares that aren’t coronavirus stocks and just because Grubhub doesn’t have 0% revenue doesn’t mean the stock is one to pile into.
It’s hard to believe the way Grubhub performed this week but that is why we hedge our trades with spreads.
Up to 17 million are now unemployed and I believe tech shares are a rude awakening when earnings are negative in the upcoming conference calls.
I didn’t like this company before the coronavirus because of poor unit economics and just because deliveries are higher for some doesn’t mean that will make up for the mass closure of many other restaurants.
Markets still wreak of volatility and this spike up is a signal to get out and protect capital.
This is not the time to bet the ranch – capital preservation is the phrase of the day.
Only use a limit order. 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 ten cents with a second order.
Here are the specific trades you need to execute this position:
Sell to Cover Short 39 April 2020 (GRUB) $50 put at………$4.70
Buy 39 April 2020 (GRUB) $47 put at………....................….$2.70
Net Proceeds:……………………..…….…...............……..…….....$2.00
Loss: $2.40 - $2.00 = $0.40
(39 X 100 X $0.40) = -$1,560 or -15.60%
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 at
https://www.madhedgefundtrader.com/ltt-vbpds/
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.
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.