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 - (VXX) – TAKE PROFITS
SELL the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) January 2021 $16 calls at $4.65 or best
Closing Trade
1-27-2020
expiration date: January 15, 2021
Portfolio weighting: 5%
Number of Contracts = 14 contracts
More than 80 people have now died from the coronavirus. The Chinese army has quarantined cities with 63 million residents. Even Disneyland in Shanghai is closed, and active cases are popping up all over the world.
You can’t imagine a better scenario for volatility owners, which we happen to have, with the Dow futures trading down 270 points in Asian trading.
When I added this position, I was prepared to wait months until we got the volatility spike we needed to make money. As it turned out we only had to wait nine days to get a 19.07% leap in the (VXX).
I am not expecting a major move in the Volatility Index (VIX) to the $25 neighborhood. And we will get many more chances to buy the (VIX) at the $12 handle.
I am therefore selling the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) January 2021 $16 calls at $4.65 or best.
This was a bet that the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) will not trade below $16.00 by the January 15, 2021 option expiration day in one year. All you needed is a pop any time in the next year, the sooner the better. The pop is here.
Here is the specific trade you need to execute this position:
Sell 14 January 2021 (VXX) $16 calls at………….………$4.65
Net Proceeds:………………………….………..………….….....$4.65
dollar proceeds = (14 X 100 X $4.65) = $6,510
Profit = $6,510 - $4,760 = $1,750 or 36.76% on an initial investment of $4,760
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.
