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 - (SPY) - BUY
BUY the S&P 500 (SPY) April 2020 $280-$290 in-the-money vertical BEAR PUT spread at $7.70 or best
Opening Trade
3-27-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 13 contracts
We have just enjoyed a massive 43-point rally off the bottom on the S&P 500 (SPY) during the last few days.
Given that I believe that the number of US Corona cases in the US could soar from 86,000 today to well over 1 million in coming weeks, I believe a shot on the short side here is justified, at least on a short-term view. Deaths will skyrocket.
We are about to see a parade of the worst economic numbers in history. How will the market react? Not good, not good.
This position also has the advantage in that it hedges our existing long positions in the (VXX) puts, our short volatility positions.
I am therefore buying the S&P 500 (SPY) March 2020 $280-$290 in-the-money vertical BEAR PUT spread at $7.70 or best.
Don't pay more than $9.00 or you'll be chasing.
If you don’t do options, take a look at the ProShares Ultra Short S&P 500 ETF (SDS).
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This is a bet that the S&P 500 (SPY) will not trade above $280.00 by the April 17 option expiration day in 15 days. That is up 26 (SPY) points, or $2,000 Dow Average points from here.
Here are the specific trades you need to execute this position:
Buy 13 April 2020 (SPY) $290 puts at………….………$37.00
Sell short 13 April 2020 (SPY) $280 puts at………….$29.30
Net Cost:………………………….……......…..………….….....$7.70
Potential Profit: $10.00 - $7.70 = $2.30
(13 X 100 X $2.30) = $2,990 or 28.87% in 15 trading days.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bear Put Spread” by clicking here.
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 on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
