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 2020 $235-$245 in-the-money vertical BULL CALL spread at $9.80 or best
Closing Trade
4-29-2020
expiration date: May 15, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I am going to use the monster seven-point rally in the (SPY) this morning to take profits. The news of Gilead Science’s successful trial of Remdesivir will generate no more than a short-term pop in a wildly overbought market.
With this trade, we were able to capture a massive 18 (SPY) points in only six trading days.
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 selling the S&P 500 (SPY) May 2020 $235-$245 in-the-money vertical BULL CALL spread at $9.80 or best. By coming out here, you are capturing 85.7% of the maximum potential profit. The risk/reward of continuing is no longer favorable. Leave the past few pennies for the beginners.
By coming out here, you get to earn a welcome $1,440 or 16.27% in 6 trading days.
Well done and on to the next trade!
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 reduce your offer by 10 cents with a second order.
If you own the (SPY) outright, sell for the short term but hold for the long term.
This was 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 was down 27 (SPY) points, or $2,400 Dow Average points from there.
Here are the specific trades you need to exit this position:
Sell 12 May 2020 (SPY) $235 calls at………..............….………$57.00
Buy to cover short 12 May 2020 (SPY) $245 calls at………….$47.20
Net Proceeds:.………..................………….………..………….….....$9.80
Profit: $9.80 - $8.60 = $1.20
(12 X 100 X $1.20) = $1,440 or 16.27% in 6 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.
