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) February 2022 $400-$410 in-the-money vertical Bull Call spread at $9.95 or best
Closing Trade
2-11-2022
expiration date: February 18, 2022
Portfolio weighting: 10%
Number of Contracts = 12 contracts
With only five cents left in this trade, I am going to take profits and plow the capital into much more profitable positions. Always leave the last 10% of a move to the next guy.
Not only did we nail the sharp selloff in the S&P 500. We also grabbed the decline in the Volatility Index (VIX) from $28 to $24. It was a nice double play.
I am therefore selling the S&P 500 (SPY) February 2022 $400-$410 in-the-money vertical Bull Call spread at $9.95 or best.
As a result, you get to take home $1,500 or 14.36% in 14 trading days. Well done, and on to the next trade.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that the S&P 500 (SPY) would not trade below $410.00 by the February 18 options expiration day in 19 trading days. That was down $30 (SPY) points, or $2,361 Dow Average points from here.
Here are the specific trades you need to close out this position:
Sell 12 February 2022 (SPY) $400 calls at………........….………$38.00
Buy to cover short 12 February 2022 (SPY) $410 calls at…….$28.05
Net Proceeds:………………………….………..……….............….….....$9.95
Profit: $9.95 - $8.70 = $1.25
(12 X 100 X $1.25) = $1,500 or 14.36% in 14 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.
