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) – TAKE PROFITS
SELL the S&P 500 (SPY) May 2022 $460-$470 in-the-money vertical BEAR PUT spread at $9.90 or best
Closing Trade
4-26-2022
expiration date: May 20, 2022
Portfolio weighting: 10%
Number of Contracts = 11 contracts
I am going to take the win here on my short in the S&P 500. By coming out here, you get to take home 91.7% of the maximum potential profit in only four days and get to skip the next 19 trading days. Now is a nice time to raise cash and protect against any upside surprises around the upcoming Fed meeting.
One can point to many downside surprises that worked in our favor. An accelerated Fed schedule for interest rates hikes, a sooner than expected end to QE, a quantitative tightening (QT) that has been moved up, soaring oil prices would be among the many.
Did I mention war with Russia over the Ukraine?
The (SPY) has problems of its own in that it is a particularly technology-heavy index, some 28%, which is facing unique headlines of its own, such as lofty valuations.
I am therefore selling the S&P 500 (SPY) May 2022 $460-$470 in-the-money vertical BEAR PUT spread at $9.90 or best
By coming out here you get to take home $1,210, or 12.50% in 4 trading days. Well done and on to the next trade!
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that the S&P 500 (SPY) would not trade above $460.00 by the May 20 option expiration day in 21 trading days. That was up 20 (SPY) points from where I added this position.
Here are the specific trades you need to close out this position:
Sell 11 May 2022 (SPY) $470 puts at……......…….………$50.00
Buy to cover short 11 May 2022 (SPY) $460 puts at….$40.10
Net Proceeds:……………………...........…….………..…….....$9.90
Profit: $9.90 - $8.80 = $1.10
(11 X 100 X $1.10) = $1,210, or 12.50% in 4 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.
