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 Russell 2000 (IWM) September 2018 $157-$160 in-the-money vertical BEAR PUT spread at $2.50 or best
Opening Trade
8-13-2019
expiration date: September 20, 2019
Portfolio weighting: 10%
Number of Contracts = 40 contracts
I don’t believe today’s tariff postponement will have no more impact on the market than a couple of days. The fact is that the global economy is slowing at an accelerating rate. This morning, the inflation rate picked up sharply making a September interest rate cut less likely.
I am therefore buying the Russell 2000 (IWM) September 2019 $157-$160 in-the-money vertical BEAR PUT spread at $2.50 or best. Remember, in falling market small cap companies fall faster than large cap ones.
Don’t pay more than $2.75 or the risk/reward will go against you.
This is a bet that the Russell 2000 (IWM) will not trade above $157.00 by the September 20 option expiration day in 22 trading days.
If you don’t do options stand aside. We are close to the top of a range and it is too late to go long or short.
Here are the specific trades you need to execute this position:
Buy 40 September 2019 (IWM) $160 puts at………….………$9.80
Sell short 40 September 2019 (IWM) $157 puts at……….….$7.30
Net Cost:………………………….………..………….…...................$2.50
Potential Profit: $3.00 - $2.50 = $0.50
(40 X 100 X $0.50) = $2,000 or 20% in 22 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 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.
