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 - (IWM) - BUY
BUY the IShares Russell 2000 ETF (IWM) December, 2017 $152-$155 in-the-money vertical BEAR PUT spread at $2.50 or best
Opening Trade
11-9-2017
expiration date: December 15, 2017
Portfolio weighting: 10%
Number of Contracts = 40 contracts
I think stocks markets may be starting to either top out, or roll over here, at least for the short term.
That is especially true of the Russell 2000, which has not participated in the rally for the past month.
An approaching yearend is a big risk for the markets, as are overstretched valuations and prices.
The warning signs of a selloff are absolutely everywhere, but until now, have been ignored.
My Mad Hedge Fund Trader Market Timing Index has been living in overbought territory for the past two months. The normal life of a medium-term top is, guess what? Two months.
I am therefore going to pick up a position in the iShares Russell 2000 ETF (IWM) December, 2017 $152-$155 in-the-money vertical BEAR PUT spread at $2.60 or best.
This is a bet that the Russell 2000 which trade at or below $152 by theDecember 15 option expiration in 26 trading days.
Don't pay more than $2.70 for this position or you'll be chasing.
If you don't do options, this would be a great level to scale into a long in the ProShares Short Russell 2000 ETF (RWM), which has recently started to move.
Here are the specific trades you need to execute this position:
Buy 40 December, 2017 (IWM) $155 puts at...................................$9.00
Sell short 40 December, 2017 (IWM) $152 puts at...............................$6.50
Net Cost:.................................................................................
Potential Profit: $3.00 - $2.50 = $0.50
(40 X 100 X $0.50) = $2,000 or 20.00% in 26 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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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.