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 - (CAT) – EXPIRATION AT MAX PROFIT
EXPIRATION of the Caterpillar (CAT) December 2023 $220-$230 in-the-money vertical Bull Call spread at $10.00 or best
Opening Trade
12-15-2023
expiration date: December 15, 2023
Portfolio weighting: 10%
Number of Contracts = 11 contracts
With this trade, we really nailed the ballistic melt-up in interest rate plays since October 26.
Just to be clear, this position does not expire until after the close on Friday, December 15. I’m sending this expiration alert out now, so I don’t overwhelm you with too many expirations at max profit in one day.
With (CAT) stock now a stunning $52, or 22.6% above the nearest $230 strike price, it’s safe to call this one a “win” with only one day left until expiration.
As a result of this trade, you get to take home $1,100 or 11.11% in 21 trading days. Well done and on to the next trade.
If you don’t do options, buy the stock. My target for (CAT) next year is $400, up 50%. I expect (CAT) to hit a new all-time high in 2024.
If you are looking for a great play on falling interest rates, you can’t do any better than heavy equipment maker Caterpillar. I have been following this company for 50 years.
They have great exposure to the housing market which will benefit greatly from falling mortgage rates. They have a factory in China that benefits from construction there. They are also cashing in on the pandemic stimulus still working its way through the system.
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, December 18 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
The flight of money right now is from small, undercapitalized, and questionable to large, overcapitalized, and rock solid.
This was a bet that Caterpillar (CAT) would not fall below $230 by the December 15 option expiration.
For more about (CAT) please click here for their website.
Here is the specific accounting you need to close out this position:
EXPIRATION of 11 December 2023 (CAT) $220 calls at…….......…$62.06
EXPIRATION of short 11 December 2023 (CAT) $230 calls at…....$52.06
Net Proceeds:……………………..…….……................…..………….….....$10.00
Profit: $10.00 - $9.00 = $1.00
(11 X 100 X $1.00) = $1,100 or 11.11% in 21 trading days.
