Trade Alert: Place a Stop-Loss on Activision

Today, we’re going to protect one of our positions.

Our January $40 call options on Activision Blizzard (Nasdaq: ATVI) are down about 63% right now — nearing our 75% loss threshold.

Sticking to my stop-loss strategy, we’re going to place a stop that will limit our loss to 75%. We’ve had a great string of winning trades — 11, including half positions — so it’s inevitable to see the occasional loss.

However, by using a stop-loss and not exiting immediately, we’re allowing some flexibility for the stock to turn things around — much like we saw with Monster Beverage (Nasdaq: MNST). As I mentioned yesterday, Monster’s stock has seen a rally recently — eliminating a good amount of loss in our call options. We’ve gone from an 85% loss to a 20% loss in about three days.

So we aren’t officially counting Activision as a loss yet. We’ll see if it can turn around.

Before placing the following stop-loss, you may have to close your standing limit orders to sell half the position for a 50% gain. It will depend on your broker.

Also, be sure to set your stop-loss order at whatever nets you a 75% loss based on your individual entry price. Our official entry price is $1.86, so our official 75% stop-loss order will be set at $0.45.

Here’s your action to take:

Action to Take
Sell Action to Take
Stock: Activision Blizzard (ATVI)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $40
Option Symbol: ATVI170120C00040000
Action: Stop-Loss Order
Order Type: GTC (Good ‘Til Canceled)
Limit Price: $0.45
Trade Deadline: Keep this order open until it is filled or canceled.

That’s all for this week. Once again, I hope you have a wonderful Thanksgiving, and I’ll talk to you next week.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert