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 - (SPY) - BUY
BUY the S&P 500 (SPY) April 2020 $275-$280 in-the-money vertical BEAR PUT spread at $4.20 or best
Opening Trade
4-2-2020
expiration date: April 17, 2020
Portfolio weighting: increase from 10%
Number of Contracts = 24 contracts
Weekly Jobless Claims exploded to 6.64 million, far and away the worst report in history, bringing total losses for this cycle to 10 million. That is traditional three full recessions of job losses in two weeks. We are already approaching Great Depression levels. The headline unemployment rate is likely 10% on its way to 30%. Will tomorrow’s March Nonfarm Payroll Report be worse?
Given that I believe that the current White House forecast for the number of US Corona cases in the US could soar from 216,722 today to well over 2 million in the coming weeks I believe that an increase in my short positions is justified, at least on a short-term view. Deaths will skyrocket. Click here for the update link.
We are about to see a parade of the worst economic numbers in history. How will the market react? Not good, not good. I certainly don’t see an upside blowout which would put this position at risk.
This position also has the advantage in that it hedges our existing long positions in the (VXX) puts, our short volatility positions.
I am therefore buying the S&P 500 (SPY) April 2020 $275-$280 in-the-money vertical BEAR PUT spread at $4.20 or best
Don’t pay more than $4.60 or you’ll be chasing.
If you don’t do options, take a look at the ProShares Ultra Short S&P 500 ETF (SDS).
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This is a bet that the S&P 500 (SPY) will not trade above $275.00 by the April 17 option expiration day in 10 trading days. That is up 26 (SPY) points, or $2,000 Dow Average points from here.
Here are the specific trades you need to execute this position:
Buy 24 April 2020 (SPY) $280 puts at……..….………$29.00
Sell short 24 April 2020 (SPY) $275 puts at………….$24.80
Net Cost:………………………….………..…......……….….....$4.20
Potential Profit: $5.00 - $4.20 = $0.80
(24 X 100 X $0.80) = $1,920 or 19.04% in 10 trading days.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bear Put Spread” 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.
