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 - (MS) – EXPIRATION AT MAX PROFIT
EXPIRATION of the Morgan Stanley (MS) October 2021 $85-$90 in-the-money vertical Bull Call spread at $5.00
Closing Trade
10-15-2021
expiration date: October 15, 2021
Portfolio weighting: 10%
Number of Contracts = 23 contracts
I am going to run the P&L on this position now, so I don’t overwhelm you, and my staff, with seven closing trade alerts at the close.
My bet that interest rates would soar, taking financial stocks with them, has proved wildly successful. That has left us with a record seven positions that expire at max profit at market close today.
I think it is therefore safe to call this position a win, even though the actual October 15 options expiration is not be until 4:15 PM EST.
We are so far in the money that we have an ample cushion going into expiration.
Since we added this position, shares of the Morgan Stanley (MS) have rocketed by $5.00. That is $12 from the nearest $90.00 strike price for this position.
It also helped that we caught the top of the move in the Volatility Index (VIX) at a $25-$29 top when we added this position. Today the (VIX) is only at $15.
Therefore, we get to take home the maximum profit in this position, such is the magic of vertical bull call debit spreads. That means you get to take home $1,610 or 16.27% in 18 trading days.
The wall of money is still there, and in fact, it is growing.
Well done and on to the next trade!
You don’t have to do anything with this expiration.
Your broker will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, October 18 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
This was an aggressive trade but the payoff is so generous that it was worth 18 days of exposure.
Morgan Stanley announced stellar earnings yesterday, with profits at $3.71 billion, up 36.4%. Morgan Stanley Asset Management sucked in an amazing $300 billion so far in 2021, bringing their total assets to $4.5 trillion. This is the department I helped start with the legendary Barton Biggs 40 years ago.
(MS) bought E-trade a few years ago, another brilliant move. The company is ripe for multiple expansions given the higher quality of its earnings. That means higher stock prices.
Europe and Asia are still at the early stage of capital market development. Morgan Stanley already has 30 million customers, and that figure could double.
The company has a 2.8% dividend, buys back 3% of its shares every year, meaning you make 7% buying the stock on day one. This should be a major long term LEAPS position for everyone.
It is clear to all that the next big sector to lead the markets will be financials. Whether the Fed tapers this week, next month, or next year, the writing is on the wall. And stocks will start discounting this eventuality two weeks ago.
Banks love rising interest rates and a 1.53% ten-year US Treasury bond yield, a 5.4% inflation rate, and a 6.5% US GDP growth rate make absolutely no sense at all, even to Jay Powell. I am willing to bet on that.
The Volatility Index at $29.00 also gave us another “BUY” signal. My Mad Hedge Market Timing Index was at a rare 22.
This pushed the Volatility Index (VIX) up to a sky-high $29, which has the effect of vastly overvaluing stock options. This was a gift for traders like us.
In addition, my own Mad Hedge Market Timing Index was strongly into “BUY” territory at 22. This is the lowest level since before the presidential election.
I believe that massive government borrowing and spending will drive US interest rates up through the roof and the value of the US dollar (UUP) down. Brokers love the massive stock market volume this generates because they vastly improve profit margins.
Covid-19 is rapidly collapsing from its fourth peak. Total US deaths yesterday exceeded the 1919 Spanish Flu 675,000 peak by the time it is all over. We passed all WWII deaths last year.
This was a bet that Morgan Stanley (MS) would not fall below $90 by the October 15 option expiration day in 18 trading days.
Here are the specific trades you need to exit this position:
EXPIRATION of 23 October 2021 (MS) $85 calls at………….….……$17.65
EXPIRATION of short 23 October 2021 (MS) $90 calls at………....$12.65
Net Proceeds:…………………….............…….………..……………….….....$5.00
Profit: $5.00 - $4.30 = $0.70
(23 X 100 X $0.70) = $1,610 or 16.27% in 18 trading days.
