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 $335-$340 in-the-money vertical BEAR PUT spread at $4.30 or best
Opening Trade
6-17-2020
expiration date: July 17, 2020
Portfolio weighting: 10%
Number of Contracts = 23 contracts
I don’t believe the stock market is going to hit a new all-time high in the next three months. After the greatest rally in market history, I think we are long overdue for some sideways range trading.
Stocks are now far more expensive than they were in January. Government bailout money won’t hit the economy for months. What has been handed out has been done so incompetently.
Only 6% of small companies were able to qualify for the Paycheck Protection program before it ran out of money. Some 52% of all small companies are expected to go bankrupt this year.
I am therefore buying the S&P 500 (SPY) July 2020 $335-$340 in-the-money vertical BEAR PUT spread at $4.30 or best.
Don’t pay more than $4.60 or you’ll be chasing.
If you don’t do options, take a look at the ProShares Ultra Short S&P 500 ETF (SDS).
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 $335 by the July 17 option expiration day in 21 trading days. That is up 23 (SPY) points, or $2,000 Dow Average points from here.
Here are the specific trades you need to execute this position:
Buy 23 July 2020 (SPY) $340 puts at…………………$30.00
Sell short 23 July 2020 (SPY) $335 puts at………….$25.70
Net Cost:………………………….………..…....……….….....$4.30
Potential Profit: $5.00 - $4.30 = $0.70
(23 X 100 X $0.70) = $1,610 or 16.27% in 21 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.
