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) – BUY
BUY the Boeing (BA) March 2020 $170-$175 in-the-money vertical Bull Call spread at $4.00 or best
Opening Trade
3-10-2020
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 25 contracts
The market has just given up 1,000 points and Boeing $22. So, I am going to dip my toe in the water here with a very deep in-the-money Boeing long.
The two strike prices I chose are the lowest for the March 20 expiration posted on the options trading board, some $45 lower. Yes, that’s how far and how fast the stock has fallen.
With the Volatility Index (VIX) at a sky-high $54, the risk/reward of going back into a call spread has been greatly improved.
I believe that Boeing (BA) shares will reach $450 sometime in 2021. The shares have just dipped by $135 to $215, thanks to the Coronavirus-induced economic slowdown worldwide. In addition, the Boeing 737 MAX, an albatross around the company’s neck for the past year, may get recertified in the coming weeks.
Not only that, with the Mad Hedge Market Timing Index at 4 level, down from 95, it's 2020 low, we are at the bottom end of an eight-month range.
I am therefore buying the Boeing March 2020 $170-$175 in-the-money vertical Bull Call spread at $4.00 or best.
To lose money on this trade, Boeing would have to drop another $45 in 8 days on top of the $135 hit we have already seen for a total loss of $180. That is a 50% top to bottom crash in 3 weeks.
This is a bet that Boeing (BA) will not trade below $175 by the March 20 option expiration day in 8 trading days.
Don’t pay more than $4.50 for this position or you’ll be chasing.
If you don’t do options, stand aside. If you already own Apple shares, which you almost certainly do if you read this newsletter, just keep them.
Here are the specific trades you need to execute this position:
Buy 25 March 2020 (BA) $170 calls at………….………$53.00
Sell short 25 March 2020 (BA) $175 calls at………….$49.00
Net Cost:……………………..…….………..………….….........$4.00
Potential Profit: $5.00 - $4.00 = $1.00
(25 X 100 X $1.00) = $2,500 or 25.00% in 8 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.
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.
