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) – EXPIRATION AT MAX PROFIT
EXPIRATION of the Bank of America (BAC) November 2021 $37-$40 in-the-money vertical Bull Call spread at $3.00
Trade Date: 11-18-2021
Expiration Date: November 19, 2021
Portfolio weighting: 10%
Number of Contracts = 40 contracts
We have an abundance of riches this month!
I am going to run the P&L on this position now, so I don’t overwhelm you and my staff with a record ten closing trade alerts at the Friday close.
My bet that interest rates would soar, taking financial stocks with them, has proved wildly successful.
I think it is therefore safe to call this position a win, even though the actual November 19 options expiration is not until tomorrow at 4:15 PM EST.
We are so far in the money that we have an ample cushion going into expiration.
Since we added this position, shares of Bank of America (BAC) have remained largely unchanged.
It also helped that we caught the top of the move in the Volatility Index (VIX) at a $25-$29 top when we added this position. Today, the (VIX) is only at $16.
Therefore, we get to take home the maximum profit in this position, such is the magic of vertical bull call debit spreads. That means you get to take home $1,600 or 15.38% in 34 trading days.
Well done and on to the next trade!
You don’t have to do anything with this expiration.
Your broker will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, November 22 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
I told you I’d be back in this name.
We are entering the golden age of banking, which could last a decade, for the following reasons:
*Interest rates are rising
*Rising interest rates increase bank profit margins
*A recovering economy means default rates are collapsing
*Thanks to Dodd-Frank, banks are overcapitalized
*Banks shares are cheap relative to other stocks
*The bank sector has underperformed for a decade
*With rates rising value stocks like banks make the perfect rotation play out of technology stocks.
*Cryptocurrencies will create opportunities for the best-run banks.
Bank shares have been joined at the hip with interest rates for the past eight months, and I believe that both rates and bank shares have much higher to go. With trillions in new government spending about to be approved, but not funded, it can’t go any other way.
I believe that bank shares could keep rising until long term US interest rates hit 2.0%, up from the current 1.60%, whenever that is.
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.
This was a bet that Bank of America (BAC) will not fall below $40 by the November 19 option expiration day in 34 trading days.
Here is the specific accounting you need to close out this position:
Expiration of 40 November 2021 (BAC) $37 calls at…….…....………$9.51
Expiration of short 40 November 2021 (BAC) $40 calls at………....$6.51
Net Proceeds:……………………..…….………..……..........…….……........$3.00
Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 15.38% in 34 trading days.
