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 - (IWM) – TAKE PROFITS
SELL the Russell 2000 (IWM) November 2018 $135-$140 in-the-money vertical BULL CALL spread at $4.90 or best
Closing Trade
11-5-2018
expiration date: November 16, 2018
Portfolio weighting: 10%
Number of Contracts = 24 contracts
16.00% in a week? I’ll take that all day long. I bet you will too.
It only because we bought this spread at the absolutely bottom of the October crash that we have made so much money in only a week.
But insane or not, I’ll take it. The fact that I can take this humongous profit a day before the midterm elections is merely the icing on the cake.
I am therefore selling my position in the Russell 2000 (IWM) November 2018 $135-$140 in-the-money vertical BULL CALL spread at $4.90 or best.
At this price you are capturing 87.5% of the maximum potential profit. The risk/reward of continuing nine more days to the November 16 option expiration are no longer favorable.
By coming out here you get to earn $1,680 or 16.66% in 5 trading days. Well done, and on to the next trade!
The Russell 2000 is an exchange-traded fund composed of 1,600 small cap companies. They do virtually no business with China. It is a great way to go long the market without picking up once over owned internationally dependent sectors.
It is interesting to note than while the main indexes have been in free fall, the (IWM) stabilized last week just below its February lows.
This was a bet that the Russell 2000 (IWM) would not trade below $140 by the November 16 option expiration day in 13 trading days. That is a level well below the February 2018 low.
If you have the stock sell it and look for a better entry point after the election.
Here are the specific trades you need to execute this position:
SELL 24 November 2018 (IWM) $135 calls at………….…$14.50
BUY TO cover short 24 November 2018 (IWM) $140 calls ….$9.60
Net Proceeds:………………………….………..………….….....$4.90
Potential Profit: $4.90 - $4.20 = $0.70
(24 X 100 X $0.70) = $1,680 or 16.66% in 5 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, 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 Vertical Call and Put Debit Spreads by clicking here.
You must be logged into your account to view the video.
Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
