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) March 2021 $400-$405 in-the-money vertical BEAR PUT spread at $4.60 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS, YOUR TURN WILL COME
3-12-2021
expiration date: March 19, 2021
Portfolio weighting: 10%
Number of Contracts = 24 contracts
I am using the weakness this morning to get out of my short in the (SPY) at cost. We have seen a monster rally this week, which we captured in our many longs, taking us too close to our strike prices.
With only five days until the March 19 option expiration, the risk/reward is no longer favorable. I believe the short-term downside risks to the market have been somewhat mitigated by Biden’s signing of the $1.9 trillion rescue package. Free money in your bank account can be a powerful aphrodisiac.
I am therefore selling the S&P 500 (SPY) March 2021 $400-$405 in-the-money vertical BEAR PUT spread at $4.60 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) will not trade above $400.00 by the March 19 option expiration day in 11 trading days. That is up 22 (SPY) points, or $1,711 Dow Average points from here. If the market gets that high in 11 days, you will think you have died and gone to heaven.
Here are the specific trades you need to exit this position:
Sell 24 March 2021 (SPY) $405 puts at…….......…….………$14.00
Buy to cover short 24 March 2021 (SPY) $400 puts at…….$9.40
Net Proceeds:…………………………........………..………….….....$4.60
Profit: $4.60 - $4.50 = $0.10
(24 X 100 X $0.10) = $240 or 2.20% in 6 trading days.
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.
