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) – TAKE PROFITS
SELL the Caterpillar (CAT) November 2020 $125-$135 in-the-money vertical Bull Call spread at $9.98 or best
Closing Trade– NOT FOR NEW SUBSCRIBERS
11-9-2020
expiration date: November 20, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
News that Pfizer (PFE) has discovered a Covid-19 vaccine that is 90% effective has sent Caterpillar (CAT) ballistic, up a staggering 9%. We have reached 98.00% of the maximum potential profit point. With only 9 days to expiration, the risk/reward is no longer favorable for continuing with this position.
I am therefore selling the Caterpillar (CAT) November 2020 $125-$135 in-the-money vertical Bull Call spread at $9.98 or best.
By coming out here, you get to take home $1,176, or 10.89% in only 6 trading days.
This was my big election play.
No matter who won the election, the housing boom would recover, agriculture would recover, and a massive infrastructure budget will get passed, igniting a national construction boom
You can’t do any of this without Caterpillar tractors.
This is still a liquidity-driven bull market.
With the Volatility Index (VIX) then up over $40, it was almost impossible to lose money on a short-dated deep-in-the-money call spread.
The (SPY) was now down 9.8% from their market highs. That is not a bad initial long side entry point.
If you have the stock, keep it as (CAT) is going much higher.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that the Caterpillar (CAT) would not trade below $135.00 by the November 20 option expiration day in 15 trading days.
Here are the specific trades you need to exit this position:
Sell 12 November 2020 (CAT) $125 calls at…….....…….………$50.00
Buy to cover short 12 November 2020 (CAT) $135 calls at….$40.02
Net Proceeds:…….......................………….………..………….….....$9.98
Profit: $9.98 - $9.00 = $0.98
(12 X 100 X $0.98) = $1,176, or 10.89% in 6 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.
