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 - (AAPL) – BUY
BUY the Apple (AAPL) March 2020 $220-$230 in-the-money vertical Bull Call spread at $8.80 or best
Opening Trade
3-10-2020
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 11 contracts
The market has just given up 1,000 points and Apple $9. So, I am going to dip my toe in the water here with a very deep in-the-money Apple long.
With the Volatility Index (VIX) at a sky high $54, the risk/reward of going back into a call spread has been greatly improved.
I believe that Apple shares will reach $400 sometime in 2020. The shares have just dipped by $54 to $273 in the wake of the company tossing its Q1 earnings guidance, thanks to the Coronavirus-induced economic slowdown in China.
Apple stores in the Middle Kingdom are closed, its factories shut down, and the customers are locked up in quarantine. It’s definitely not an environment to sell more iPhones.
In other words, you don’t get a better long side entry point than this.
Not only that, with the Mad Hedge Market Timing Index at 4 level, down from 95, its 2020 low, we are at the bottom end of an eight-month range.
I am therefore buying the Apple (AAPL) March 2020 $220-$230 in-the-money vertical Bull Call spread at $8.80 or best. To lose money on this trade, Apple would have to drop another $43 in 8 days on top of the $54 hit we have already seen for a total loss of $97. That is a 42% top to bottom crash.
This is a bet that Apple (AAPL) will not trade below $230 by the March 20 option expiration day in 8 trading days.
Don’t pay more than $9.50 for this position or you’ll be chasing.
If you don’t do options, stand aside. If you already own Apple shares, which you almost certainly do if you read this newsletter, just keep them.
Here are the specific trades you need to execute this position:
Buy 11 March 2020 (AAPL) $220 calls at………….………$55.00
Sell short 11 March 2020 (AAPL) $230 calls at………….$46.20
Net Cost:……………………..…….........………..………….….....$8.80
Potential Profit: $10.00 - $8.80 = $1.20
(11 X 100 X $1.20) = $1,320 or 14.94% in 8 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.
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Things to Keep in Mind
Remember, 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.
