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 - Pinterest, Inc. (PINS) – SELL – STOP LOSS
SELL – STOP LOSS Pinterest, Inc. (PINS) May 2021 $60-$65 in-the-money vertical BULL CALL spread at $3.25
Closing Trade
5-3-2021
expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 26 contracts
This was a short-term trade that Pinterest, Inc. (PINS) would stay above $65 by May 21st expiration.
This trade went south after management performed terribly during the earnings call signaling a slowdown in user engagement in the upcoming quarter.
I did expect light guidance but not to the extent that management confided to us which is why the stock was hit hard cratering 15% last week.
We’ve been traversing sideways just above the upper strike of $65 for the past few trading days and this latest dive lower means it's time to cut losses here.
The “reopening trade” has been priced into the stock, and it made no sense for management to signal to investors to sell all at once which is what happened.
Pinterest has a stable business and has really shown impressive flashes with a growth expansion last quarter of 78% and a 3-Year Sales Growth Rate of 50%.
Therefore, I blame management for a poor communication handoff to the other side of the COVID solution. There is no way a company this good should be selling off 15% on an earnings call even if guidance is underwhelming.
Pinterest is an internet photo-sharing and publishing service that allows users to “Pin” pictures they like and upload their own recommendations to their “pinboards.” Users can visit other pinboards, 're-pin' images to their own pinboards, or ‘like’ photos.
They earn revenue by largely selling digital ads on their site.
My end-of-year target for PINS has been lowered to $90.
Here are the specific trades you need to exit this position:
Sell to Close 26 May 2021 (PINS) $60 calls at………….………$6.60
Buy to Close 26 May 2021 (PINS) $65 calls at…….........…….$3.35
Net Proceeds:……………...............………..…….….……..…….....$3.25
Loss: $3.77 - $3.25 = $.52
(26 X 100 X $.52) = $1,352 or 13.76%
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.
