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 - (KO) – EXPIRATION AT MAX PROFIT
EXPIRATION of the Coca-Cola (KO) February 2021 $44-$47 in-the-money vertical Bull Call spread at $3.00
Closing Trade
2-22-2021
expiration date: February 19, 2021
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I’m just cleaning up the last of the expiring Friday option positions. This option call spread expired last Friday, but there were too many positions expiring at max profit last week to send out in a single day.
Since we added this position, (KO) appreciated by $1.37. As a result, you get to take home $1,330 or 13.20% in 9 trading days.
You don’t have to do anything with this expiration.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, February 22 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
This trade was totally out of character for me. Soft drinks are not where the future is. However, it is Warren Buffet’s largest position in Berkshire Hathaway (BRK/A) and it is at the bottom of a six-month trading range after a big selloff.
If the stock drops anymore, Warren will come in as a big buyer, as will all of his many copycats.
As is Warren’s way, it has a monster 3.36% dividend yield, or three times the ten-year US Treasury bond yield. (KO) is a classic cash flow king and dividend aristocrat. So, I believe the downside risk over the next nine trading days is minimal. I’ll take the free money, thank you very much.
And no, they don’t put cocaine in it anymore.
This was a bet that Coca-Cola (KO) would not fall below $47.00 by the February 19 option expiration day in 9 trading days.
Here are the specific trades you need to close out this position:
EXPIRATION of 38 February 2021 (KO) $44 calls at……............……$6.31
EXPIRATION of short 38 February 2021 (KO) $47 calls at…............$3.31
Net Proceeds:……………………..…..................….………..…………..….....$3.00
Profit: $3.00 - $2.65 = $0.35
(38 X 100 X $0.35) = $1,330 or 13.20% in 9 trading days.
And I Got a Free Coke Too
