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 2022 $480-$500 in-the-money vertical BEAR PUT spread at $17.00 or best
Opening Trade
1-13-2022
expiration date: February 18, 2022
Portfolio weighting: 10%
Number of Contracts = 6 contracts
Where is the upside surprise from here?
One can point to many downside surprises. An accelerated Fed schedule for interest rate hikes, a sooner-than-expected end to QE, a quantitative tightening (QT) that has been moved up, soaring oil prices would be among the many. Did I mention war with Russia over the Ukraine?
We have just enjoyed a healthy 18-point rally off the Monday bottom in the S&P 500 (SPY). When I looked at the strike prices for this trade two years ago, I have to laugh. They were the $260-$270 put spread, and I made money on it!
With a 27% in 12 months, I believe that the rate of appreciation is going to have to slow. The low-hanging fruit has already been harvested. So, for the first time in a year, I am going to add a short position.
The (SPY) has problems of its own in that it is a particularly technology-heavy index, some 28%, which is facing unique headlines of its own, such as lofty valuations.
I am therefore buying the S&P 500 (SPY) February 2022 $480-$500 in-the-money vertical BEAR PUT spread at $17.00 or best
Don’t pay more than $18.00 or you’ll be chasing.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This is a bet that the S&P 500 (SPY) will not trade above $480.00 by the February 18 option expiration day in 25 trading days. That is up 12 (SPY) points, or $932 Dow Average points from here.
If you don’t do options, stand aside. This is a very short-term options expiration play only.
Here are the specific trades you need to execute this position:
Buy 6 February 2022 (SPY) $500 puts at………….………$32.00
Sell short 6 February 2022 (SPY) $480 puts at………….$15.00
Net Cost:…………………..........……….………..………….….....$17.00
Potential Profit: $20.00 - $17.00 = $3.00
(6 X 100 X $3.00) = $1,800 or 16.66% in 25 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.