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 - (AAPL) STOP LOSS
SELL the Apple (AAPL) March, 2018 $170-$175 in-the-money vertical Bear Put spread at $2.45 or best
Closing Trade
2-16-2018
expiration date: March 16, 2018
Portfolio weighting: 10%
Number of Contracts = 25 contracts
This trade shows you in bright lights what happens when you violate all your own rules and pray for a reversal in your favor.
Normally, selling apple on top of a two day 12% move is a good idea (its never happened before). Not this time.
Stopping out here is a matter of pre risk control. Of course Apple, and the entire market is wildly overbought. However, by taking the hit here I am secure in the knowledge that we will be well into double digits by the March 16 option expiration in 19 trading days.
It really has been an unbelievable three weeks: down 3,300 points and then up 2,000 points, the Volatility Index (VIX) going from $9 to $52.50 and then back to $19. It is a time I will tell my grandchildren about if I ever have any.
Here are the specific trades you need to exit this position:
Sel1 25 March 2018 (AAPL) $175 puts at..............................................$5.45
Buy to cover short 25 March 2018 (AAPL) $170 puts at.........................$3.00
Net Proceeds:........................................................................................$2.45
Loss: $3.90 - $2.45 = $1.45
(25 X 100 X $1.45) = $3,625 or 37.17% in 3 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.
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 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.
