As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(SPY)
Buy the S&P 500 (SPY) May, 2014 $188-$191 in-the-money bear put spread at $2.43 or best
Opening Trade
4-14-2014
expiration date: May 16, 2014
Portfolio weighting: 30%
Number of Contracts: 125
This is a bet that the S&P 500 does not rocket to a new all time high by the May 16, 2014 expiration.
The news flow this morning is giving us an opportunity to re enter the short positions that I covered on Friday. Half of the opening 80-point pop in the Dow came from Citibank (C), which surprised to the upside with its Q1 earnings report.
We also got March retail sales +1.1%, better than expected.
We are down only 4.1% in this pullback, not even matching the 6% January dump, and we have clearly not suffered enough for our IPO sins. An eroding quantitative easing from Janet Yellen?s Federal Reserve is clearly taking a toll.
This rally could continue for a day or two more. But it has been so difficult to get short positions off in this correction that I don?t mind erring on the side of being a little early. The reversals ambush you at openings you can?t trade, and take no prisoners. We will probably get our reward on Friday in the next weekend flight to safety.
It is only because implied volatilities are so elevated that I can get this position so far out of the money off so richly, with only 23 trading days left until the May 16 expiration. The spring swoon has sent put prices through the roof, as panicking institutions rush to buy downside insurance a little too late.
Charts and technical analysis are far more useful and important in falling markets than rising one, as the downside crowd is far more dependent on this dismal science.
The fact that these charts are breaking down across markets on increasing volume is terrible news.
A sector rotation out of aggressive technology (XLK), financial (XLF), and discretionary stocks (XLY) into defensive consumer staples (XLP) and utilities (XLU) is a further complicating factor that is making matters worse.
Ten year Treasury yields approaching a five-month low is another nail in the coffin.
All that is needed is a match to ignite a broader, more vicious selloff and Russian Prime Minister Vladimir Putin has a whole box of them!
1,760 in the S&P 500, here we come, the 200-day moving average!
Keep in mind that fast markets, such as the one we have, I can get you only ballpark prices at best. It?s every man for himself. Praise the Lord, and pass the ammunition.
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.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Buy 125 May, 2014 (SPY) $191 puts at?????$8.58
Sell short 125 May, 2014 (SPY) $188 puts at..??.$6.15
Net Cost:????????????????.....$2.43
Profit at expiration: $3.00 - $2.43 = $0.57
(125 X 100 X $0.57) = $7,125 or 7.13% profit for the notional $100,000 portfolio.
