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)
Sell the S&P 500 (SPY) May, 2014 $191-$194 in-the-money bear put spread at $2.86 or best
Closing Trade - not for new subscribers
4-11-2014
expiration date: May 16, 2014
Portfolio weighting: 10%
Number of Contracts = 42 contracts
Take the money and run. No one ever got fired for taking a profit. That?s the mood I was in when I came in and saw my long volatility ETF (VXX) spiking and my short in the S&P 500 (SPY) cratering.
It helped that Mad Day Trader Jim Parker, rushed the chart below to me right after the opening showing that the NASDAQ 100, the chief whipping boy in this selloff, is becoming severely oversold and fast approaching a major area of support (the lime green line). Bonds (TLT) are stalling at $110.60, and the ?RISK OFF? move in the Japanese yen (FXY) is approaching the upper limit of its 2014 range.
This all adds up to the possibility that another one of those ?rip your face off? short covering rallies could be near.
The rule in this type of market is to take the quick profits. You especially want to date, and not marry, the (VXX), since the contango over time can cost you your shirt.
Trading on the short side is a totally different animal than traditional long side plays. It is much harder work, as shorts behave totally differently than longs. The movie is on fast forward and you must act quickly.
To be up 15.45% so far in 2014, a down year when most investors are tearing their hair out, and up a meteoric 7.89% in April, is nothing less than heroic. The email plaudits have already started pouring in. Now all your friends at the country club can hate you, but only if you followed my advice.
Let me tell you what I did right this week, so you can take a page from the playbook of the master.
1) I kept the positions small, so I could sleep at night
2) I did the hard trade, selling when everyone else loved this market
3) I took trading profits quickly
4) I ignored the talking heads on TV so I wouldn?t puke out at the bottom
5) I didn?t take the Princess cruise from San Francisco to Los Angeles, where 50 passengers and 25 crew came down with norovirus. Imagine getting sick before you get to Mexico.
Is it possible that I am improving with age? That I?m becoming a better trader as I get older? That the payoff for a 45-year accumulation of market experience keeps increasing? What a concept!
I don?t think this correction is over. Vladimir Putin can drop a bombshell on the markets at any time. We are going into the traditional May-October ?RISK OFF? seasonal with markets still very near all time highs. The midterm elections in November are introducing a new level of uncertainty. The IPO bubble continues unabated (there are seven today!), and will only end in tears.
And who knows when another cruise ship is going to come down with norovirus?
But nothing moves in a straight line. It?s time to move to the sidelines so I can reload on the short side after the next short covering rally exhausts itself.
As for me, I am going to spend the rest of the day writing checks to the US Treasury to pay taxes for myself, the numerous entities I control, and a gaggle of impoverished relatives. All American tax returns are due on Tuesday.
Then I?m going down to Union Square in San Francisco and buy myself a new Brioni suit, another pair of Bruno Magli shoes, and have a kir royal at the top of the Mark Hopkins Hotel, thankful for my good fortune that I can pay all these bills.
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:
Sell 42 May, 2014 (SPY) $194 puts at?????$11.66
Buy to cover short 42 May, 2014 (SPY) $191 puts at..??.$8.80
Proceeds:??????????????????.....$2.86
Profit: $2.86 - $2.38 = $0.48
(42 X 100 X $0.48) = $2,016 or 2.02% profit for the notional $100,000 portfolio.
