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.
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Trade Alert - (VXX) - TAKE PROFITS
SELL the IPath S&P 500 VIX Short Term Futures ETN (VXX) - November, 2017 $20 calls at $0.78 or best
Closing Trade
8-9-2017
expiration date: November 17, 2017
Portfolio weighting: 2.5%
Number of Contracts = 185 contracts
This was a bet that the (VXX) would rise sometime in the next three months. As it turned out, we only had to wait an hour.
This was a high-risk unhedged trade so I went in with only a 2.5% position.
After trading unhedged deep out-of-the money options for 50 years, I have had one lesson branded on to me with great pain.
Take the easy money. Take profits on every gap up.
For if you don't, time decay can be a cruel taskmaster an eat op those profits too quickly.
This is especially true of the (VXX), which has a massive contango, a differential between front month and far month prices, built into it which assures that the price of this derivative always goes down.
It is likely that the (VIX) will trade higher than the $12.63 print we saw today, up an eye popping 32.95% from yesterday's $9.5 low. But it has to make it all the way up to $20.54 if we want to profit at the November 17 expiration.
I am not willing to make that bet.
In addition, my Mad Hedge Market Timing Index endured one of the sharpest dumps of the year, down from 66 to 49, well into "BUY" territory. That alone augers for taking a quick short term profit.
The (VIX) is now trading at an upper level that has proved stiff resistance for many months.
So I am therefor taking profits in my position in the IPath S&P 500 VIX Short Term Futures ETN (VXX) November, 2017 $20 calls at $0.78 or best.
As they used to say in journalism, be nice to people on the way up because you always meet them again on the way down.
The same is true for option prices.
Going deep out-of-the-money also minimized the cash up front we need to pay for this position, while increasing my leverage on the cheap.
Finally, I have a confession to make.
Taking a 44.40% profit in a single trading day gives me a real thrill. So I like to take every one. This will add $1,110 to my model-trading portfolio in less than 24 hours.
Kachiiing!
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 Bull Call Spread" by clicking here at http://members.
You must be logged into your account to view the video.
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.
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 with only 13 days 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.
Here are the specific trades you need to execute this position:
Sell 185 November, 2017 (VXX) $20.00 calls at................................................................$0.78
Net proceeds:...............................................................................................................
Profit: $0.78 - $0.54 = $0.24
(185 X 25 X $0.24) = $1,110, or 44.40% in 1 trading day.
