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) – BUY
BUY the Bank of America (BAC) February $28-$30 in-the-money vertical Bull Call spread at $1.75 or best
Opening Trade
2-3-2021
expiration date: February 19, 2021
Portfolio weighting: 10%
Number of Contracts = 57 contracts
If you don’t do options, buy the stock. My target for (BAC) this year is $50, up 40%.
This is a very aggressive trade with only 12 days to expiration.
However, bonds (TLT) have just hit a new low for the year and lower prices beckon. When bonds go down, banks can only go up as rising interest rates are hugely beneficial for their profits.
The House effort to fast-track a $1.9 trillion stimulus package may be part of this. All of this will have to be borrowed since the Biden administration has inherited record deficits.
The shortcoming in this trade is that we are buying AFTER the Volatility Index (VIX) cash from a sky-high $38 to only $23. But (VIX) tends to flatline for months after these big dives so a 12-day bet should be OK.
I am therefore buying the Bank of America (BAC) February $28-$30 in-the-money vertical Bull Call spread at $1.75 or best
Don’t pay more than $1.85 or you’ll be chasing.
I believe that massive government borrowing, and spending will drive US interest rates up through the roof and the value of the US dollar (UUP) down. Banks love high interest rates because they vastly improve profit margins.
Covid-19 is rapidly approaching its third peak. Total US deaths could exceed the 1919 Spanish Flu 625,000 peak by the time it is all over. We passed all WWII deaths last week.
This is a bet that Bank of America (BAC) will not fall below $30 by the February 19 option expiration day in 12 trading days.
Here are the specific trades you need to enter this position:
Buy 57 February 2021 (BAC) $28 calls at………….………$3.50
Sell short 57 February 2021 (BAC) $30 calls at……….....$1.75
Net Cost:……………………..….........….………..………….….....$1.75
Potential Profit: $2.00 - $1.75 = $0.25
(57 X 100 X $0.25) = $1,425 or 14.28% in 12 trading days.
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.
