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) – TAKE PROFITS
SELL the S&P 500 (SPY) July 2020 $260-$270 in-the-money vertical BULL CALL spread at $9.35 or best
Closing Trade
6-29-2020
expiration date: July 17, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
There is no doubt the Corona picture is getting worse, with deaths topping 125,000 and many states like Florida and Texas shutting down again. The accompanying adverse effects on the economy will be dire. I am therefore going to take what profits I have here.
I am therefore selling the at S&P 500 (SPY) July 2020 $260-$270 in-the-money vertical BULL CALL spread at $9.35 or best. By coming out here, you get to take home $660, or 6.25% in 10 trading days in a deteriorating market.
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 decrease your offer by 10 cents with a second order.
This was a bet that the S&P 500 (SPY) would not trade below $270.00 by the July 17 option expiration day in 23 days.
Here are the specific trades you need to exit this position:
Sell 12 July 2020 (SPY) $260 calls at……........…….………$41.00
Buy to cover short 12 July 2020 (SPY) $270 calls at…….$31.65
Net Proceeds:………………….....……….………..………….….....$9.35
Profit: $9.35 - $8.80 = $0.55
(12 X 100 X $0.55) = $660, or 6.25% in 10 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.
