Updated: Jul 23, 2019
UPDATED - JULY 17, 2019
BotTrigger Trade Alert: $PYPL sold our July $100 / $120 call spread @ $19.10 for a 82% gain since our entry @ $10.50 back on May 2.
Very simply, Paypal is now trading around $119.50 so we've pretty much hit our forecasted target of PYPL trading to around $120 per share by/upon expiration. More importantly, with expiration a mere 2 days out, we've closed this out so we don't risk that PYPL might pullback even further. For example, if PYPL were to close @ $116/share by Friday's close then the value of this spread would be worth $16 ($1,600 per contract). We're able to get $19.10 right now and sure we could squeeze a maximum of $20 if indeed PYPL closes @ $120 upon Friday's close, but I'm not interested in gambling such a trivial move. We'd be totally guessing if we assumed that PYPL was going to close @ $120 within 2 days time. We have no edge in guessing as much. We play for the big moves here. The easy money on this trade has already been made.
Our next move is to rotate the proceeds from the earnings on this trade into a new PYPL position that has higher yield. Now we just have to stalk the right setup on PYPL. We're looking for either an authoritative breakout or more preferably our favorite place is almost always going to be once we get what? THE NEXT RELATIVE PULLBACK. This is almost always the best way to get optimal pricing on call spreads (or options) that have the potential to yield significant gains.
Recall our TSLA June 2020 $360 / $380 call spread where we were able to add into @ $1.00. The MAX VALUE of $20 represents a 1900% gain opportunity. The pricing opportunity was only made possible once we got extreme capitulation where we got filled on the day that TSLA hit it's intraday low of the entire correction back around the $178 area.
Recall our AAPL Jan 2021 $210 / $230 call spread where got filled on the very day that AAPL hit the $140.85 low of the correction back on January 3 of this year. The MAX VALUE of $20 represents a 809% gain opportunity.
Now those were very deep bearish corrections that cause -40 to -50% corrections. So those were rare setups on scale but the main takeaway here is this: We want to almost always be buying pullbacks on quality names that are in a confirmed uptrend on the primary term time frame. Assessing how far the pullback is likely to run it's course and where to take positions, what positions to take etc. is all part of the modeling that we showcase on our setups.
Stay tuned on PYPL as a new trade setup is eminent.
May 2, 2019 - Original Post
BotTrigger Trade Alert: $PYPL bought the July 19 2019 $100 / $120 vertical call spread @ $10.50 for about a 3.5% allocation.
This trade stands to make a 90% gain so long as share price closes @ $120 or greater than upon July 19th expiration (78 days away). The breakeven occurs if PYPL is @ $110.50 upon exp & max loss occurs if share price is at $100 or less than. Paypal has been nothing but BULL STRONG since breaking out of a year long darvas / congestion box. That breakout occurred in Jan/Feb of this year and since then PYPL has been in a melt-up rally that's gone up about 20% from the breakout zone. For relative context, the last big rally that occurred after a 1-year congestion box breakout on PYPL ran up for a 75% rally in 149 trading days. Here we are right now on trading day 66 up so far about 20%, or 15% when you account for the current pullback. What's more, the measured move breakout target from most recent 1-year long digestion box is around $120. We also said the measured move breakout target on SHOP was around $230 but we see it now around the $256 area. The text book move on AAPL we had forecasted back in 2016 showed that breakout from the bottoming pattern that was fleshing out was around $220...and AAPL overshot to $230. My point is...PYPL can easily overshoot. How many of you use Venmo? How many of you use Square?