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) December 2022 $420-$430 in-the-money vertical bear put spread at $9.85 or best
Closing Trade
12-6-2022
expiration date: December 16, 2022
Portfolio weighting: 10%
Number of Contracts = 12 contracts
Markets are clearly in meltdown mode again, so it is a great time to cover shorts. In four trading days, the (SPY) has cratered a gut-punching $18.
When I strapped on this trade on November 18, I told myself to get out of it before the December 13 Consumer Price Index report. That time is now less than a week off.
I am up so much this year already that I am happy to take a mere 86.36% of the maximum potential profit in this trade and NOT CARE what the CPI report is next week.
If the report is weak and the inflation rate drops another 1%, markets will blast off to new highs. If it is hot, markets will give up their recent gains and retest the lows. So, we may flatline all the way until December 13.
We still have a recession overhanging the market, even if it is just a mild one. That sets up a round of profit-taking in January. Notice also that with the Volatility Index all the way down to $23, we won’t earn as much from this spread as we did when it was in the mid $30s.
Therefore, I am selling the S&P 500 (SPY) December 2022 $420-$430 in-the-money vertical bear put spread at $9.85 or best.
As a result, you get to take home $1,140, or 10.67% in 12 trading days. Well done, and on to the next trade!
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 5 cents with a second order.
This was a bet that the S&P 500 (SPY) would not trade above $420.00 by the December 16 option expiration day in 20 trading days.
Here are the specific trades you need to close out this position:
SELL 12 December 2022 (SPY) $430 puts at…….............….…$39.00
Buy to cover short 12 December 2022 (SPY) $420 puts at…….$29.15
Net Proceeds:…………………………...........................……….………$9.85
Profit: $9.85 - $8.90 = $0.95
(12 X 100 X $0.95) = $1,140, or 10.67% in 12 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.
