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 - (IBKR) – STOP LOSS
SELL the Interactive Brokers (IBKR) August 2024 $110-$115 in-the-money vertical Bull Call spread at $3.50 or best
Closing Trade
8-2-2024
expiration date: August 16, 2024
Portfolio weighting: 10%
Number of Contracts = 25 contracts
The disastrous July Nonfarm Payroll Report out this morning at 114,000 and a Headline Unemployment Rate popping to a one-year high at 4.3% was the first real black swan in a year.
It showed traders that a recession is now a sure thing if the Fed doesn’t take immediate action to cut interest rates, which they might. To a trader, “might” means “SELL”.
It triggered panic dumping across the board, especially in Big Tech stocks where we only have short positions. We also saw the largest one-day drop in the Mad Hedge Market Timing Index, from 46 to 25. In the meantime, our interest rate plays are rocketing, with the (TLT) hitting an incredible $98.
Brokers also don’t do well in recessions since trading volumes shrink in bear markets. Since we have dramatically crossed our upper strike price of $115, I am forced to sell my position in (IBKR).
I am therefore selling the Interactive Brokers (IBKR) August 2024 $110-$115 in-the-money vertical Bull Call spread at $3.50 or best
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by 10 cents with a second order.
This was a bet that Interactive Brokers (IBKR) would not fall below $115 by the August 16 option expiration day in 11 trading days. For more about (IBKR), please click here for their website.
Here are the specific trades you need to close out this position:
Buy 25 August 2024 (IBKR) $110 calls at………….………$5.00
Sell short 25 August 2024 (IBKR) $115 calls at…….…....$1.50
Net Proceeds:….…………..…….………..………….….............$3.50
Loss: $4.40 – 3.50 = $0.90
(25 X 100 X $0.90) = $2,250
If you are uncertain about 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.
