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) STOP LOSS
SELL the S&P 500 (SPY) March, 2018 $275-$280 in-the-money vertical BEAR PUT spread at $3.10 or best
Closing Trade
2-26-2018
expiration date: March 16, 2018
Portfolio weighting: 10%
Number of Contracts = 24 contracts
Usually betting that the Dow Average WON'T rise 2,000 points in ten days is a winning bet. After all, it has never happened before.
Not this time.
There was a huge buy of the S&P 500 (SPY) at market at the market close which tells me that this bullish move may have more to go. This happened when it was too late for me to send out a STOP LOSS Trade alert.
Since risk control is the order of the day, I am going to stop out of my position in the S&P 500 (SPY) March, 2018 $275-$280 in-the-money vertical BEAR PUT spread at $3.10 or best
If you don't do options, stand aside. This is an options protection strategy only.
The reason I took out this position was to extend my downside breakeven point for my major long positions in case the market decided to retest the lows. That retest never came.
While a $2,400 loss is never welcome, no one ever complains when their house doesn't burn down after they buy fire insurance.
This loss is more than amply offset by the substantial profits we made owning Amazon (AMZN), Apple (AAPL), Facebook (FB), Delta Airlines (DAL), and the Volatility Index (VXX), and Micron Technology (MU) and Salesforce (CRM) in case you also subscribe to the Mad Hedge Technology Letter.
We are still up for the month of February, and still well up for all of 2018, despite suffering the most violent market move in history. Most investors will take that all day long, and wisely so.
Here are the specific trades you need to exit this position:
Sell 24 March 2018 (SPY) $280 puts at................................................$5.85
Buy to cover short 24 March 2018 (SPY) $275 puts at...........................$2.75
Net Proceeds:.......................................................................................$3.10
Loss: $4.10 - $3.10 = $1.00
(24 X 100 X $1.00) = $2,400 or 24.39%.
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.
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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.