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) – SELL – STOP LOSS
SELL the S&P 500 (SPY) July 2020 $320-$330 in-the-money vertical BEAR PUT spread at $5.62 or best
Closing Trade
6-8-2020
expiration date: July 17, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I am sorry, but I am not very good at predicting once-in-a-hundred-year events. Risk control demands I bail on my last short position in stocks.
The 1,000-point move up in the Dow Average triggered by a 10 million miss in the May Nonfarm payroll is not something I am willing to bet against. Obviously, ALL of the stimulus money is pouring into the stock market.
Some 1.2 million of the job gains were made by the Leisure & Hospitality industry. Yet, there is not a single restaurant in my neighborhood is open, except for takeout. Something here is not making sense.
Fortunately, most of this loss will be covered by my short position in bonds, which are in free fall today.
I am therefore selling the S&P 500 (SPY) July 2020 $320-$330 in-the-money vertical BEAR PUT spread at $5.62 or best
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that the S&P 500 (SPY) would not trade above $320.00 by the July 17 option expiration day in 42 trading days.
Here are the specific trades you need to exit this position:
SELL 12 July 2020 (SPY) $330 puts at………….…..…..…$14.00
Buy to cover short 12 July 2020 (SPY) $320 puts at…….$8.38
Net proceeds:………………………….………..………...….….....$5.62
Loss: $8.90 - $5.62 = -$3.28
(12 X 100 X -$3.28) = -$3,936.
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.
