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) May 2020 $235-$245 in-the-money vertical BULL CALL spread at $8.60 or best
Opening Trade
4-21-2020
expiration date: May 15, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
We have just enjoyed a massive 18-point decline off the top of the S&P 500 (SPY) over the last 48 hours. The nervousness is palpable.
I believe that all the hot money is out of the market and the margin calls executed. That sets us up for a long-term bottoming process. It is possible that we could be trading in a $250-$290 range in the (SPY) for the next few weeks, if not months.
I am therefore buying the S&P 500 (SPY) May 2020 $235-$245 in-the-money vertical BULL CALL spread at $8.60 or best.
Don’t pay more than $9.00 or you’ll be chasing.
If you don’t do options, stand aside. It is too early to take an outright long stock position in this market.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and increase your offer by 20 cents with a second order.
This is a bet that the S&P 500 (SPY) will not trade below $245.00 by the May 15 option expiration day in 17 days. That is down 27 (SPY) points, or $2,400 Dow Average points from here.
Here are the specific trades you need to execute this position:
Buy 12 April 2020 (SPY) $235 calls at………….………$41.00
Sell short 12 April 2020 (SPY) $245 calls at………….$32.40
Net Cost:………………………….………..……......…….….....$8.60
Potential Profit: $10.00 - $8.60 = $1.40
(12 X 100 X $1.40) = $1,680 or 16.27% in 14 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.
