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 - (BA) – TAKE PROFITS
SELL the Boeing (BA) February 2020 $270-$280 in-the-money vertical BULL CALL spread at $9.95 or best
Closing Trade - Not for new subscribers
2-12-2020
expiration date: February 21, 2020
Portfolio weighting: 10%
Number of Contracts = 11 contracts
Boeing goes ex-dividend tomorrow and I want to avoid getting hit with a dividend payment through the assignment of my short option leg.
I am therefore selling the Boeing (BA) February 21, 2020 $270-$280 in-the-money vertical BULL CALL spread at $9.95 or best.
Put in a limit order at $9.95. If it doesn’t get done, then lower your price in 5 cent increments until you are. If you can’t get done at all, there is only a small chance you will get assigned on your short calls. Worst case, you breakeven on the trade if you are.
By coming out here, I get to duck a potential crash risk over the next seven trading days, either because of another bad news print from Boeing, or from a selloff from the market in general.
You also get to reap 95% of the maximum potential profit. The risk/reward of continuing is no longer favorable. This will generate a $1,045 profit, or 10.56% in 21 trading days.
This was a bet that Boeing shares will not fall below the $280 strike price by the February options expiration date. We nailed it, catching a $40 move up in the shares.
Well done, and on to the next trade.
Here are the specific trades you need to execute this position:
Sell 11 February 2020 (BA) $270 calls at………….……......…$78.00
Buy to cover short 11 February 2020 (BA) $280 calls at….$68.05
Net Proceeds:……………………..…….………..…..........……….....$9.95
Profit: $9.95 - $9.00 = $0.95
(11 X 100 X $0.95) = $1,045 or 10.56% in 21 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.
