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) - EXPIRATION
EXPIRATION the S&P 500 (SPY) December 2019 $297-$302 in-the-money vertical bull call spread at $5.00
Closing Trade
10-20-2019
expiration date: December 20, 2019
Portfolio weighting: 10%
Number of Contracts = 22 contracts
Provided that the (SPY) does not fall 19.28 points, or 6.00% by the close today, our position in the S&P 500 (SPY) December 2019 $297-$302 in-the-money vertical bull call spread will expire at its maximum value at $5.00.
Buying on Trump’s threat to continue the trade war with China for at least another year provided the perfect trade to execute.
The Volatility Index (VIX) had soared from $11 to $18 and the Mad Hedge Market Timing Index has dumped from 92 to 60, or from extremely overbought to nearly neutral.
There was enough support in the market to keep it from substantially falling over the next two weeks. The next thing we heard was that the tariff increase has been postponed, causing stocks to rally to new all-time highs.
Trump will do whatever he can do to eke out one more stock rally, even though it is Jay Powell’s ultra-low interest rate policy that is doing the heavy lifting.
This was a bet that the S&P 500 (SPY) would not trade below $302.00 by the December 20 option expiration day in 13 trading days. These strikes also had the additional benefit in that they have huge downside support from the 50-day moving average at $302.84.
You don’t need to do anything, as the expiration process is now fully automated. The profit will be deposited into your account and the margin freed up on Monday morning.
Well done, and on to the next trade!
EXPIRATION of 22 December 2019 (SPY) $297 calls at…..………$24.28
EXPIRATION of short 22 December 2019 (SPY) $302 calls at…..$19.28
Net Proceeds:…………………………........................…..……….….….....$5.00
Potential Profit: $5.00 - $4.55 = $0.45
(22 X 100 X $0.45) = $990 or 9.9% in 13 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, 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 Vertical Call and Put Debit Spreads by clicking here.
You must be logged into your account to view the video.
Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
