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 - (M) - BUY
BUY the Macys (M) August 2019 $23-$25 in-the-money vertical BEAR PUT spread at $1.74 up to $1.85
Opening Trade
8-6-2019
expiration date: August 16, 2019
Portfolio weighting: 10%
Number of Contracts = 57 contracts
When market volatility is elevated, as it is now, profitable trades become possible that might otherwise seem impossible.
Now is one of those times. I think the retailers are going to continue to have a going out of business sales. Not only do they have massive structural challenges, the trade war with China could come at a worse time.
The 2019 Christmas season is now at sea. It’s too late to cancel the orders. That means that retailers are going to have to eat the 10% tariff increase due in September, accelerating their losses.
Trump’s order to raise tariffs on the last $300 billion of Chinese imports will hit (WMT) squarely in between the eyes. Their profit margins are so small that they will be vaporized by a 10% increase in cost, which they will be unable to pass on in this Amazoned world. Retailers are already the largest minimum wage employer in the US so there certainly isn’t room to cut wages.
I am therefore buying the Macys (M) August 2019 $23-$25 in-the-money vertical BEAR PUT spread at $1.74 or best.
Don’t pay more than $1.85 or the risk/reward will go against you.
This is a bet that the Macys (M) will not trade above $23.00 by the August 16 option expiration day in 7 trading days.
If you don’t do options, stand aside.
Here are the specific trades you need to execute this position:
Buy 57 August 2019 (WMT) $25 puts at………….………$4.30
Sell short 57 August 2019 (WMT) $23 puts at………….$2.56
Net Cost:………………………….………..………….….............$1.74
Potential Profit: $2.00 - $1.74 = $0.26
(57 X 100 X $0.26) = $1,482 or 20% in 7 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.
