Trade Alert - (PYPL) August 5, 2019 - 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.

 

Trade Alert - (PYPL) – SELL – STOP LOSS

SELL the PayPal Holdings, Inc. (PYPL) August 2019 $100-$105 in-the-money vertical BULL CALL spread at $3.45 or best

Closing Trade

8-5-2019

expiration date: August 16, 2019

Portfolio weighting: 10%

Number of Contracts = 22 contracts

China retaliates against the U.S. by unraveling their tightly controlled currency. The Chinese Yuan falls past the psychologically important threshold of $7 to 1 Yuan and markets are fretting over the broad-based carnage this could do to American companies.

This is a market-wide risk-off move in the short-term and many investors are expecting Trump to gear up his Twitter account for a counterattack which could mean tougher conditions in 2019 for the multinational corporation.

PayPal is a great company and shouldn’t be thrown away long term, but this trade being short duration must be covered because sentiment is overwhelmingly negative.

The reason we bought this in the first place was because of the weakness in the stock caused by a downgrade by Guggenheim's from sell from neutral, setting a $104 target price.

"We believe shares of PayPal will begin underperforming as investors increasingly contemplate 2020," he wrote.

The trade was golden until the administration slapped more tariffs on China and the whole market disintegrated.

I still think this is a great company and the fintech’s are on pace to eat traditional bank firms’ lunch and more.

The administration is likely to go into their kitty of ant-trade tricks to slap more tariffs on China or even request an expedited delivery of the Huawei executive from China.

Anything is on the table at this point and uncertainty means scared investors.

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

Sell 22 August 2019 (PYPL) $100 calls at…………..............………$6.02

Buy to cover short 22 August 2019 (PYPL) $105 calls at………….$2.57

Net Proceeds:……………………..…….………..……...........................$3.45

Loss: $4.43 - $3.45 = -$0.98

(22 X 100 X $0.98) = $2,156

 

 

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.