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 2019 $270-$275 in-the-money vertical BEAR PUT spread at $4.40 up to 4.70
Opening Trade
1-9-2019
expiration date: February 15, 2019
Portfolio weighting: 10%
Number of Contracts = 23 contracts
Having caught the blistering 24 point, or 9% rally in the S&P 500, I am inclined to go from aggressively long to NEARLY neutral here.
I believe we are entering a trading range that will persist until the big earnings reports come out in February.
Investors are still battle-scarred from the Q4 stock market crash. They will be thankful sellers as the (SPY) approaching the old major support of $260 which will now present formidable resistance. A retest of the December lows could take place at any time, especially in the aftermath of an out-of-the-blue presidential tweet or awful data point.
Also challenging upside barriers are the 50-day moving average at $262.35 and the 200-day moving average at $271.25.
This is a bet that the S&P 500 (SPY) will not trade above $270 by the February 15 option expiration day in 28 trading days.
If you don’t do options, stand aside. We are close to the top of a new range and it is too late to go long or short.
Here are the specific trades you need to execute this position:
Buy 23 February 2019 (SPY) $275 puts at………….………$18.50
Sell short 23 February 2019 (SPY) $270 puts at………….$14.10
Net Cost:………………………….………..………….….....$4.40
Potential Profit: $5.00 - $4.40 = $0.60
(23 X 100 X $0.60) = $1,380 or 12.36% in 27 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.
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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.
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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.