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 - (TLT) – EXPIRATION AT MAX PROFIT
EXPIRATION of the Microsoft (MSFT) February 2022 $340-$350 in-the-money vertical Bear Put spread at $10.00
Closing Trade
2-18-2022
expiration date: February 18, 2022
Portfolio weighting: 10%
Number of Contracts = 11 contracts
Just to be clear, this position does not expire at max profit until 4:00 pm EST close today. But with a record nine positions expiring at the same time, I am going to start rolling out the accounting now, so you don’t get overwhelmed.
With the upper strike price a healthy 11.89% in the money, I think it is safe to call this one a win. As a result, you get to take home $1,540 or 16.27% in 25 trading days.
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, February 21 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
This was a bet that Microsoft would not rise above $340 by the February 18 option expiration in 25 trading days.
Here is the specific accounting you need to close out this position:
EXPIRATION of Buy 11 February 2022 (MSFT) $350 puts at……………$41.58
EXPIRATION of Sell short 11 February 2022 (MSFT) $340 puts at……$31.58
Net Proceeds:………………………….………........................……………….....$10.00
Profit: $10.00 - $8.60 = $1.40
(11 X 100 X $1.40) = $1,540 or 16.27% in 25 trading days.
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
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 on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
