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 - (IWM) – BUY
BUY the iShares Russell 2000 ETF (IWM) August 2024 $202-$212 in-the-money vertical Bull Call spread at $9.00 or best
Opening Trade
8-1-2024
expiration date: August 16, 2024
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I admit I’m a little late going into small caps (IWM) here. But Jay Powell’s note yesterday that a Fed interest rate cut is in the mail for September means this trade still has some juice in it.
Coming off an extreme multiyear low is another big plus.
Keep in mind that 60% of the remaining small caps are regional US banks. Lower interest rates will make their troubles in the local commercial real estate market go ahead. They will also assist with the recapitalization of these small institutions which they all sorely need.
Know also that the Russell 2000 actually only has 1,600 stocks in it. The other 400 either went bankrupt or merged. The (IWM) index is owned and managed by FTSE Russell and doesn’t update the (IWM) quarterly as S&P Dow Jones Indices does with the S&P 500 (SPY). The (IWM) is an incredibly shrinking index.
We don’t make much money with an 11-day play until the August 16 options expirations. But it’s better than a poke in the eye with a sharp stick and I want to remain fully invested while markets are melting up. Yesterday’s provide taking in (NVDA) freed up some cash.
I am therefore buying the iShares Russell 2000 ETF (IWM) August 2024 $202-$212 in-the-money vertical Bull Call spread at $9.00 or best.
Don’t pay more than $9.50 or you’ll be chasing on a risk/reward basis.
Only use a limit order. 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 increase your bid by 10 cents with a second order.
This is a bet that the iShares Russell 2000 ETF will not fall below $212 by the August 16 option expiration in 11 trading days.
Here are the specific trades you need to execute this position:
Buy 12 August 2024 (IWM) $202 calls at………...….………$23.00
Sell short 12 August 2024 (IWM) $212 calls at…....………$14.00
Net Cost:………………………….……...........…….………….….....$9.00
Potential Profit: $10.00 - $9.00 = $1.00
(12 X 100 X $1.00) = $1,200 or 11.11% in 11 trading days.
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.
