In today's Flow Show, Steve Strazza and I discuss what feels like the birth of a new leg higher for this ongoing, but recently struggling bull market.
And while I was lamenting the performance of $AAPL lately, Steve showed me the mirror opposite: $AMZN.
Watch this video to see how we arrived at today's trade, and see the details below:
Here's the Play:
I like buying an $AMZN June 250/300 Bull Call Spread for an approximately $9.65 net debit. This means I'll buy the June 250 calls and sell an equal amount of the 300 calls. And this debit I pay today represents the most I can lose if I'm dead wrong:
Amazon has earnings coming up on Thursday, February 6th. I'm mindful of this, in fact, I think it could be the catalyst that shoots this stock higher. But if I'm wrong, my risks are defined to the debit I paid.
For risk management purposes, I'll exit this spread if either one of the following conditions is met:
$AMZN sees a closing price below $215 at any time during my hold. Or,
The value of this spread declines by 50% of what I paid.
In either situation, the market is proving to me that I'm either wrong or early and it's time to protect what's left of my capital in this trade.
Meanwhile, I'll leave a GTC limit order to sell this spread at $40.00 to book my profit. If it gets to $40, that's 80% of the spread's maximum potential value, and that'll be good enough for me.
P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.
