As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert - (IWM) - BUY
Buy the Russell 2000 iShares (IWM) May, 2015 $119-$122 deep in-the-money vertical call spread at $2.37 or best
Opening Trade
4-7-2015
expiration date: May 15, 2015
Portfolio weighting: 10%,
Number of Contracts = 42 contracts
Time for another visit to the trough. This could be the trade that keeps on giving.
You can buy this vertical bull call spread anywhere within a $2.20-$2.60 range and have a reasonable expectation of making money on this trade. Don?t hold me to these prices as they are all over the map this morning.
If you don?t like how the call spread sets up, your can buy the Russell 2000 (IWM) outright, or the ProShares Ultra Russell 200 2X leveraged ETF (UWM).
Please click here at http://www.proshares.com/funds/uwm.html for the precise details of the leveraged ETF.
Another more aggressive alternative is to buy only the June, 2015 (IWM) $128 calls at $2.10 with no short side hedge for a potential double.
There is no doubt that a major, multi year upside breakout is taking place in US small cap stocks. Check out the chart below for the iShares Core S&P Small Cap ETF (IJR).
Small cap stocks are the bigger beneficiaries of cheap oil, but are not adversely affected by the weak euro. Therefore, I expect the (IWM) to lead the market in early 2015, handily outperforming the big cap S&P 500, which is being dragged down by the energy sector.
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.
If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Buy 42 May, 2015 (IWM) $119 calls at?????$6.89
Sell short 42 May, 2015 (IWM) $122 calls at..??.$4.52
Net Cost:??????????????????.....$2.37
Potential Profit: $3.00 - $2.37 = $0.63
(42 X 100 X $0.63) = $2,646 or 2.65% profit for the notional $100,000 portfolio.
