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) – STOP LOSS
SELL the Russell 2000 (IWM) September 2019 $153-$156 in-the-money vertical BEAR PUT spread at $2.30 or best
Closing Trade
9-5-2019
expiration date: September 20, 2019
Portfolio weighting: 10%
Number of Contracts = 41 contracts
News that the US and China will meet to discuss trade in October has triggered a 400-point short covering rally. That has pushed our short position in the Russell 2000 slightly below cost. Given that performance protection is a major goal of mine, I am going to run for the hills.
I am therefore selling the Russell 2000 (IWM) September 2019 $153-$156 in-the-money vertical BEAR PUT spread at $2.30 or best. By coming out here, you will lose $615 or 6.52%.
This was a bet that the Russell 2000 (IWM) will not trade above $153.00 by the September 20 option expiration day in 18 trading days.
More than offsetting this loss will be the substantial profits on the four long big tech positions we still own.
Here are the specific trades you need to exit this position:
Sell 41 September 2019 (IWM) $156 puts at………......………$5.80
Buy short 41 September 2019 (SPY) $153 puts at...…….......$3.50
Net Proceeds:………….............……………….………..……..….....$2.30
Loss: $2.45 - $2.30 = -$0.15
(41 X 100 X $0.15) = $615 or 6.52%.
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.
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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.
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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.
