As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Trade Alert - (BAC)-STOP LOSS AND ROLL DOWN
Sell the Bank of America (BAC) February, 2015 $15-$16 in-the-money vertical call spread at $0.71 or best
Closing Trade
1-14-2015
expiration date: February 20, 2015
Portfolio weighting: 10%
Number of Contracts = 115 contracts
You can sell this put spread anywhere within $0.68-$0.75 range and limit your losses.
If you bought the stock outright sell for the short term or hold for the long term.
With the collapse of the bond market, and 30-year Treasury bonds hitting an all time low yield of 2.40%, it is clear we need more room on the downside with Bank of America. I am therefore going to roll down my strikes for the second time in a week.
That means selling you existing Bank of America (BAC) February, 2015 $15-$16 in-the-money vertical call spread at $0.71, and then buying the Bank of America (BAC) February, 2015 $14-$15 in-the-money vertical call spread at $0.87 to replace it.
This moves the breakeven for the position down a full dollar to $14.85 in the (BAC) share price. That is below the 12 month low for the past 12 months.
This cuts my total loss on both Bank of America positions from $1,840 to $70, after we net out the profit and loss on the two positions. That?s assuming (BAC) shares stay over the $15 by the February expiration.
The collapse of German 10 year bund yields is clearly dragging yields down all around the world, including those for US Treasuries. That has an immediate adverse effect on the banks in the form of narrower cost of funds and lending spreads.
This put the kibosh on the financials for now, and justifies my turning wimpy on the sector. But I do want to keep a position here in case the long awaited turn the bond market finally comes when I an sleeping, which isn?t very often.
It is also prudent to pull in your horns on anything risky the day before a nonfarm payroll report.
Keep in mind that the options market is highly illiquid now, so don?t hold me to these prices. They are ballpark estimates, at best.
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.
If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Sell 115 February, 2015 (BAC) $15 calls at?????$1.36
Buy to cover short 115 February, 2015 (BAC) $16 calls at...$0.65
Net Cost:??????????????????.....$0.71
Loss: $0.87 - $0.71= $0.16
(115 X 100 X -$0.16) = -$1,840 or -1.84% loss for the notional $100,000 portfolio.
