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 - (FCX) – GET OUT AT COST
SELL the Freeport McMoRan May $10.50-$11.50 bull call spread at $0.90 or best
Closing Trade
5-1-2019
expiration date: 5-17-2019
Portfolio weighting: 10%
Number of Contracts = 111 contracts.
When a stock drops 5% and you can get out for even, you take the gift.
The assumptions that went into this trade have failed to deliver. The China trade deal never showed, despite daily administration promises that it would do so. Other sympathetic assets like gold (GLD) have rolled over and died. And the latest economic reports from China have been a tad on the weak side.
In addition, I will be at the SALT conference in Las Vegas next week, so I won’t be able to focus my usual laser-like focus on intraday price action. When you are this close to a strike price with markets at extended all-time highs, you don’t go missing in action.
I am therefore selling the Freeport McMoRan May $10.50-$11.50 bull call spread at $0.90 or best. It’s tempting to hang on to this position with only 12 trading days to expiration. But “hope” is not a viable trading strategy. We’ve made a ton of money trading this year, especially in bonds and I am going to hold on to it with a death grip, stopping out sooner than usual.
It is possible that we are making a double bottom here at $12.00 and that the shares will continue to trade sideways. But there are no guarantees, and the probability of this happing is lower than it was a week ago.
This was a bet that (FCX) will not fall below $11.50 by the May 17 options expiration in 15 trading days.
If you like copper, you’ve got to love Freeport McMoRan (FCX), the world’s largest producers of the red metal. On top of that, the stock yields a 1.55% dividend and sell at a lowly multiple of 7X. These factors explain the sizeable insider buying that has been taking place in the shares over the past month.
This commodity is known in the investment industry as Dr. Copper, the only metal that has a PhD in economics. That’s because of its uncanny ability to predict the future of the global economy. Copper is now hinting of better things to come for China and the global economy as a whole.
Here are the specific trades you need to exit this position:
Sell 111 May 2019 (FCX) $10.50 calls at…………........…..…$1.55
Buy to cover short 111 May 2019 (FCX) $11.50 calls at... $0.65
Net Proceeds:………………………………....….....…..…….......$0.90
Profit: $0.90 - $0.90 = $0.00
($0.00 X 100 X 111) = $0 – 0% for the notional $100,000 model portfolio.
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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
