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) July 2020 $260-$270 in-the-money vertical BULL CALL spread at $8.80 or best
Opening Trade
6-15-2020
expiration date: July 17, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
With the (SPY) down a monster $26, or 8.0% from the top, I am going to dip my toe in here on the long side with the July operations.
I am therefore buying the at S&P 500 (SPY) July 2020 $260-$270 in-the-money vertical BULL CALL spread at $8.80 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.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and increase your bid by 10 cents with a second order.
Here is the question you are answering with this trade. The current market capitalization of US stocks today is $30 trillion. Is $14 trillion worth of government stimulus enough to support stocks at this value, giving you a (SPY) worth $300? Probably not.
Is it enough to support a market down 10% from here and 18% from the stop, giving you a (SPY) of $270? Probably yes. If it isn’t, the Fed has announced they will turn on the presses to print enough money to do so.
That is your trade.
This is a bet that the S&P 500 (SPY) will not trade below $270.00 by the July 17 option expiration day in 23 days. That is down a hefty $30 (SPY) points, or $2,550 Dow Average points from here.
If you don’t do options, use sharp market selloff’s like today’s to gradually scale into the (SPY) outright.
Here are the specific trades you need to execute this position:
Buy 12 July 2020 (SPY) $260 calls at………….………$45.00
Sell short 12 July 2020 (SPY) $270 calls at………….$36.20
Net Cost:………………………….……....…..………….….....$8.80
Potential Profit: $10.00 - $8.80 = $1.20
(12 X 100 X $1.20) = $1,440 or 13.63% in 24 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 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.