Trade Alert - (JD) September 28, 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 - JD.com, Inc. (JD) – BUY

BUY - JD.com, Inc. (JD) October 2021 $80-$85 in-the-money vertical BEAR put spread at $4.25

Opening Trade

9-28-2021

expiration date: October 15, 2021

Portfolio weighting: 10%

Number of Contracts = 23 contracts

This is a short-term bet that Chinese ecommerce firm JD.com, Inc. (JD) will stay BELOW $80 in the next 17 days which means that even if the underlying stock goes slightly up from the current price, we will still make a profit.

The Nasdaq is getting cudgeled this morning as higher interest rates are forcing investors to flee from tech.

The investing environment couldn’t be worse for Chinese tech stocks so I am shorting JD.com through options.

I am not impressed with this Chinese tech purge carried out by the Chinese Communist Party and I believe it will cap any rebound in the short-term.

Many companies have gotten hammered, and I don’t see any reason to think this will be a buy-the-dip price action.

JD.com is the competitor to Alibaba, who hasn’t been doing so hot either as of late and I just don’t believe the appetite is there to get into Chinese tech stocks on a short-term basis with the debt ceiling issue thrusting to the fore and interest rate worries spiking.

Some of the biggest names in China’s tech industry made an appearance at the World Internet Conference (WIC) in Wuzhen on Sunday to pledge support for the country’s “common prosperity” and small and medium-sized enterprises (SMEs) nearly a year after the government began an extensive crackdown on the sector.

Smartphone maker Xiaomi co-founder Lei Jun and Alibaba Group Holding CEO Daniel Zhang Yong were two of the more coveted names to deliver speeches at the state-run conference.

They pledged to “aid” society even if it is a detriment to their stock price.

Under no circumstances should you ever hold Chinese tech stocks for the long-term, they are a barrel of gunpowder waiting to be lit.

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

Buy 23 October 2021 (JD) $85 puts at………….………$10.55

Sell short 23 October 2021 (JD) $80 puts at….……….$6.30

Net Cost:……………………..…….............…..……..…….....$4.25

Potential Profit: $5 - $4.25 = $.75

(23 X 100 X $.75) = $1,725 or 17.65% in 17 days.

 

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.