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 $477-$487 in-the-money vertical BEAR PUT spread at $8.50 or best
Opening Trade
1-18-2022
expiration date: February 18, 2022
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I am going to use the whopping great three-point rally in the (SPY) this morning to double up my position there. A move in the Volatility Index (VIX) above $22 this morning greatly increases the payoff for these front-month bear put spreads.
Where is the upside surprise from here?
One can point to many downside surprises. An accelerated Fed schedule for interest rates 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?
With a 27% move up in 12 months, I believe that the rate of appreciation is going to have to slow dramatically. The low-hanging fruit has already been harvested. So, for only the second time in a year, I am going to add another 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 $477-$487 in-the-money vertical BEAR PUT spread at $8.50 or best
Don’t pay more than $9.20 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 $477.00 by the February 18 options expiration day in 22 trading days. That is up 19 (SPY) 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 12 February 2022 (SPY) $487 puts at………….………$29.00
Sell short 12 February 2022 (SPY) $477 puts at………….$20.50
Net Cost:………………………….............………..………….….....$8.50
Potential Profit: $10.00 - $8.50 = $1.50
(12 X 100 X $1.50) = $1,800 or 17.64% in 22 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.
