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) – BUY
BUY the Apple (AAPL) March 2020 $325-$330 in-the-money vertical Bear Put spread at $4.40 or best
Opening Trade
3-4-2020
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
As much as I love Apple for the long term, I don’t believe that we are going to a new all-time high in the next two weeks. So, I am going to use today’s Joe Biden-induced 600 point rally in the Dow Average and $6 rally in Apple to sell short.
And now I am also in the enviable position in that any short positions in the stock market are hedge by our put options in the (VXX).
With the Volatility Index (VIX) at a sky high $34, the risk/reward of going into a bear put spread has been greatly improved.
Apple stores in the Middle Kingdom are closed, its factories shut down, and the customers are locked up in quarantine. It’s definitely not an environment to sell more iPhones.
In other words, you don’t get a better short side entry point than this.
I am therefore buying the Apple (AAPL) March 2020 $325-$330 in-the-money vertical Bear Put spread at $4.40 or best. To earn this much money on a spread 10% in-the-money with only 12 days to expiration is unimaginable, but that is the kind of trade that a (VIX) of $34 allows.
To lose money on this trade, Apple would have to rise another $30 in two weeks on top of the $40 gain we have already seen.
This is a bet that Apple (AAPL) will not trade above $325 by the March 20 option expiration day in 12 trading days.
Don’t pay more than $4.60 for this position or you’ll be chasing.
If you don’t do options, stand aside.
Here are the specific trades you need to execute this position:
Buy 23 March 2020 (AAPL) $330 puts at………….………$35.00
Sell short 23 March 2020 (AAPL) $325 puts at………….$30.60
Net Cost:……………….........……..…….………..………….….....$4.40
Potential Profit: $5.00 - $4.40 = $0.60
(23 X 100 X $0.60) = $1,380 or 13.63% in 12 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.
You must be logged into your account to view the video.
Things to Keep in Mind
Remember, 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.
