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) – SELL-STOP LOSS
SELL the Russell 2000 (IWM) December 2018 $130-$140 in-the-money vertical BULL CALL spread at $8.10 or best
Closing Trade
12-17-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts = 11 contracts
I still believe that the Russell 2000 (IWM) is defining the bottom of a new range from which it will spring to much higher highs. However, I can’t guarantee what it will do over the next four trading days when out option position expires.
I am therefore selling the Russell 2000 (IWM) December 2018 $130-$140 in-the-money vertical BULL CALL spread at $8.10 or best.
With only two weeks left in 2019, capital preservation and locking in great performance is the name of the game.
Why buy the Russell instead of the S&P 500 (SPY)? Because small companies do virtually no China business, which is roiling the markets daily. Big companies get about 60% of their earnings from abroad.
If you own the (IWM) ETF keep it. It is way overdue for a serious trading bounce.
This was a bet that the Russell 200 (IWM) would not trade below $140 by the December 21 option expiration day in 14 trading days. It is also a bet that the (IWM) will NOT drop below the February $142 low.
With many positive yearend effects about to kick it was a bet I was willing to make. Buy when traders are jumping out of windows. That is always a great trading rule.
Here are the specific trades you need to exit this position:
Sell 11 December 2018 (IWM) $130 calls at………….………$9.70
Buy to cover short 11 December 2018 (IWM) $140 calls at…...$1.60
Net Proceeds:………………………….………..……………..….....$8.10
Loss: $8.80 - $8.10 = $0.70
(11 X 100 X $0.70) = $770.
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.