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) January 2023 $420-$430 in-the-money vertical bear put spread at $9.00 or best
Opening Trade
12-19-2022
expiration date: January 20, 2023
Portfolio weighting: 20% - double weighting
Number of Contracts = 25 contracts
I think the stock market is ready for a real shellacking in January. A 5% drop is likely, and if we get lucky, maybe 10%. The Volatility Index (VIX) should climb to at least $30.
By taking on an options put trade now, you get the benefit of low volatility and time decay over the extended holiday period. There is no point in passing up a sweet trade just because some guy with a white beard in a red suit is about the descend down the chimney.
And let me tell you, starting out the New Year with a big profit in your trading account is the way to go. It lets you trade from a position of strength for the rest of the year.
I don’t see any upside surprises on the horizon that could upset this position. Q4 earnings are about to be released and the sense of foreboding to palpable. We also get an assist from the 200-day moving average, which should provide major upside resistance.
The $420 level also should provide a formidable barrier, where rallies have failed for the past six months. That’s why I am going with an aggressive 20% double weighting.
I am not sure how many trading windows we are going to get in 2023, so we have to take advantage of every one, even if it is from a ski slope.
Therefore, I am buying the S&P 500 (SPY) January 2023 $420-$430 in-the-money vertical bear put spread at $9.00 or best.
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 bid by 5 cents with a second order.
Don’t pay more than $9.40 or you will be chasing.
If you don’t do options, stand aside. This is a short-term options play only.
This is a bet that the S&P 500 (SPY) will not trade above $420.00 by the Janaury 20 options expiration day in 19 trading days.
Here are the specific trades you need to execute this position:
Buy 25 January 2023 (SPY) $430 puts at……….....…$47.00
Sell short 25 January 2023 (SPY) $420 puts at…….$38.00
Net Cost:………………………….………...................………$9.00
Potential Profit: $10.00 - $9.00 = $1.00
(25 X 100 X $1.00) = $2,500, or 22.22% in 19 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.
