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) April 2020 $275-$280 in-the-money vertical BEAR PUT spread at $4.90 or best
Closing Trade
4-3-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 24 contracts
I love taking one day profits, especially ahead of a long weekend.
Market Volatility is getting crushed today, greatly boosting the value of our deep in-the-money put spreads. My experience tells me that when the market offers you a big check, you grab it with both hands and run like hell.
I am therefore selling the S&P 500 (SPY) April 2020 $275-$280 in-the-money vertical BEAR PUT spread at $4.90 or best
By coming out here, you get to earn 87.50% of the maximum potential profit in this position. The risk/reward of continuing with this position is no longer favorable. That amounts to a welcome $1,680, or 16.67% in One trading day in these incredibly tempestuous markets.
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 lower your offer by ten cents with a second order.
This was a bet that the S&P 500 (SPY) would not trade above $275.00 by the April 17 option expiration day in 10 trading days. That was up 26 (SPY) points, or $2,000 Dow Average points from here.
Here are the specific trades you need to exit this position:
Sell 24 April 2020 (SPY) $280 puts at………….….............……$34.00
Buy to cover short 24 April 2020 (SPY) $275 puts at………….$29.10
Net Proceeds:………………………….………..………….….................$4.90
Profit: $4.90 - $4.20 = $0.70
(24 X 100 X $0.70) = $1,680 or 16.67% in 1 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.
