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) April 2020 $280-$290 in-the-money vertical BEAR PUT spread at $8.10 or best
Opening Trade
3-30-2020
expiration date: April 17, 2020
Portfolio weighting: increase from 10% to 20%
Number of Contracts = 12 contracts
The pandemic is growing exactly according to my model, doubling every three days. The news over the weekend couldn’t be worse. Global cases have exploded to 737,929 and we should tip 1 million by late tomorrow. Italy and Spain are losing 1,000 people a day. US cases have rocketed to 143,055 and deaths over 2,000 (click here for the update).
We are now almost certainly in for a repeat of the 1918 flu epidemic, but with modern medicine.
We have learned that the president has extended the economy’s self-induced coma to April 30. That is short of the true target by a month.
To believe that the stock market can face this down with only a -23% decline from vastly inflated February top, last week’s recovery high, is delusional.
We are about to see a parade of the worst economic numbers in history. How will the market react? Not good, not good.
This position also has the advantage in that it over-hedges our existing long positions in the (VXX) puts, our short volatility positions.
I am therefore doubling the S&P 500 (SPY) April 2020 $280-$290 in-the-money vertical BEAR PUT spread at $8.10 or best.
Don’t pay more than $9.00 or you’ll be chasing.
If you don’t do options, take a look at the -2X ProShares Ultra Short S&P 500 ETF (SDS). If you are more aggressive, try the -3X ProShares Ultra Pro Short S&P 500 (SPXU).
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 $280.00 by the April 17 option expiration day in 14 days. That is up 37 (SPY) points, or $3,400 Dow Average points from here.
Remember, the gold standard in this epidemic is no human contact whatsoever.
Here are the specific trades you need to execute this position:
Buy 12 April 2020 (SPY) $290 puts at………….………$37.00
Sell short 12 April 2020 (SPY) $280 puts at………….$28.90
Net Cost:……………......…………….………..………….….....$8.10
Potential Profit: $10.00 - $8.10 = $1.90
(12 X 100 X $1.90) = $2,280 or 23.45% in 14 trading days.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bear Put Spread” 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.
