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) November 2018 $135-$140 in-the-money vertical BULL CALL spread at $4.20 or best
Opening Trade
10-30-2018
expiration date: November 16, 2018
Portfolio weighting: 10%
Number of Contracts = 24 contracts
The Russell 2000 is an exchange-traded fund composed of 1,600 small cap companies. They do virtually no business with China. It is a great way to go long the market without picking up once over owned internationally dependent sectors.
It is interesting to note that while the main indexes have been in free fall, the (IWM) stabilized last week just below its February lows.
I am therefore buying the Russell 2000 (IWM) November 2018 $135-$140 in-the-money vertical BULL CALL spread at $4.20 or best.
This is a bet that the Russell 2000 (IWM) will not trade below $140 by the November 16 option expiration day in 13 trading days. That is a level well below the February 2018 low.
Don’t pay more than $4.50 for this position or you’ll be chasing.
If you don’t do options buy the (IWM) ETF outright. We are close to a market bottom.
Here are the specific trades you need to execute this position:
Buy 24 November 2018 (IWM) $135 calls at………….………$14.50
Sell short 24 November 2018 (IWM) $140 calls at………….$10.30
Net Cost:………………………….………..………….….....$4.20
Potential Profit: $5.00 - $4.20 = $0.80
(24 X 100 X $0.80) = $1,920 or 19.04% in 13 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.
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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 it done, don’t worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
