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) February, 2018 $267-$270 in-the-money vertical BULL CALL spread at $2.55 or best
Opening Trade
2-2-2018
expiration date: February 16, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
Finally, finally, the stock market noticed that interest rates are rising, although they have been doing so unrelentingly since July. Call stock traders slow learners. All I can say is that no one here at the Mad Hedge Fund Trader is surprised, not even the furniture.
At the peak today, the ten-year Treasury yield (TLT) hit 2.855%, a four-year high, up a steep 45 basis points since December 31. My 2018 target of a 3.0%-3.50% range beckons.
I think we are either??AT the bottom of this move down in the S&P 500 (SPY), or within a day of the final bottom.
Right here we have a 3.5% correction in the (SPY) and 3.7% in the Dow Average from the January 28 top.
We have been punished enough. I am therefore taking a position in the S&P 500 (SPY) February, 2018 $267-$270 in-the-money vertical BULL CALL spread at $2.55 or best.
To lose money on this trade, the (SPY) would have to sell off a full 6.05%, and it would have to do this in only 9 trading days by the February 16options expiration. In other words, this would have to be the biggest draw down in more than two years.
I just don't see that happening in the face of the 14% corporate earnings growth we are seeing in the current quarter.
Don't pay more than $2.70 for this position or you'll be chasing.
If you don't do options, close your eyes and buy (SPY) shares outright.
Buy 38 February 2018 (SPY) $267 calls at.....................................$11.40
Sell short 38 February 2018 (SPY) $270 calls at.......................$7.95
Net Cost:........................................................................................
Potential Profit: $3.00 - $2.55 = $0.45
(38 X 100 X $0.45) = $1,710 or 17.64% in 9 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.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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.
