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 - INCREASE SHORT
BUY the S&P 500 (SPY) February 2024 $485-$490 in-the-money vertical Bear put debit spread at $4.40 or best
Opening Trade
1-18-2024
expiration date: February 16, 2024
Portfolio weighting: increase from 10% to 20%
Number of Contracts = 25 contracts
The tape is definitely feeling heavy, so I am doubling up my short position with this trade from 10% portfolio weighting to 20%. This is the first short position I have issued in seven months.
After the most heroic stock rally in history, prices are starting to roll over. The Volatility Index ($VIX) just hit a two-month high at $15.50 so we are finally getting paid for vertical bear put debit spreads. We also have substantial long positions in big tech to hedge.
I am therefore buying the S&P 500 (SPY) February 2024 $485-$490 in-the-money vertical Bear put debit spread at $4.40 or best.
Don’t pay more than $4.70 or you’ll be chasing on a risk/reward basis.
This is a bet that the S&P 500 will not rise above $485 by the February 16 option expiration in 21 trading days.
Here are the specific trades you need to execute this position:
Buy 25 February 2024 (SPY) $490 puts at………….………..$20.00
Sell short 25 February 2024 (SPY) $485 puts at………....…$15.60
Net Cost:………………………….………..……..........…….…..........$4.40
Potential Profit: $5.00 - $4.40 = $0.60
(25 X 100 X $0.60) = $1,500 or 13.64% in 21 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.
