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 - (BAC) –SELL-STOP LOSS
SELL the Bank of America (BAC) August 2020 $24-$25 in-the-money vertical Bull Call spread at $0.86 or best
Closing Trade
8-20-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 111 contracts
Even though this position expires tomorrow, and we are still in-the-money, I am going to stop out for close to even. Risk control is the order of the day. We have five remaining profitable positions to offset this loss.
I am therefore selling the Bank of America (BAC) August 2020 $24-$25 in-the-money vertical Bull Call spread at $0.86 or best.
Stock players should go ahead and keep the shares, which probably have a double in them over the next three years.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by 2 cents with a second order.
This was a bet that Bank of America (BAC) will not trade below $25 by the August 21 option expiration day in 7 trading days.
Here are the specific trades you need to exit this position:
SELL 111 August 2020 (BAC) $24 calls at………...............………$1.14
BUY TO COVER short 111 August 2020 (BAC) $25 calls at…..$0.28
Net Proceeds:……………………..…….………..…….........…….….....$0.86
Loss: $0.90 - $0.86 = $0.04
(111 X 100 X $0.04) = $444, or 4.44% in 6 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 by clicking here.
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 on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
