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) - BUY
BUY the Caterpillar (CAT) December 2020 $145-$150 in-the-money vertical Bull Call spread at $4.40 or best
Opening Trade
11-18-2020
expiration date: December 18, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
I am not inclined to buy at highs, on upside breakouts, or on momentum. However, I will make an exception in the case of Caterpillar (CAT) which is in the sweet spot for all things economic in 2021.
Massive infrastructure spending is about to hit all 50 states in the US. Home construction continues to break all records. A resumption of trade relations with China will lead to an increase in agricultural production.
You can’t do any of this without Caterpillar tractors.
I am therefor buying the Caterpillar (CAT) December 2020 $145-$150 in-the-money vertical Bull Call spread at $4.40 or best
Don’t pay more than $4.70 or you’ll be chasing.
If you don’t do options, just buy the (CAT) outright for a long-term investment.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This is a bet that the Caterpillar (CAT) will not trade below $150.00 by the December 18 option expiration day in 22 trading days.
Here are the specific trades you need to execute this position:
Buy 23 December 2020 (CAT) $145 calls at………….………$30.60
Sell short 23 December 2020 (CAT) $150 calls at………….$26.20
Net Cost:………………..............………….………..………….….....$4.40
Potential Profit: $5.00 - $4.40 = $0.60
(23 X 100 X $0.60) = $1,380 or 13.63% in 22 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.
