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.
BUY the Russel 2000 (IWM) April 2019 $160-$165 in-the-money vertical BEAR PUT spread at $4.60, up to $4.70
Opening Trade
3-7-2019
expiration date: April 18, 2019
Portfolio weighting: 10%
Number of Contracts = 23 contracts
There are so many technical indicators rolling over right now I can’t count them.
With the Mad Hedge Market Timing Index hitting a nosebleed 72 last week, close to a one-year high, there is a high chance that this will be a successful trade.
And the great thing about selling short the Russel 2000 is that in bear markets, it falls 1.5 times faster than the (SPY). That’s because small companies have fewer resources with which to weather a recession than big ones.
I am therefore buying the Russel 2000 (IWM) April 2019 $160-$165 in-the-money vertical BEAR PUT spread at $4.60 or best.
Don’t pay more than $4.70 or the risk/reward will turn against you.
This is a bet that the Russel 2000 (IWM) would not trade above $160 by the April 18 option expiration day in 31 trading days. It is also a bet that the (IWM) will NOT trade to a new all-time high.
If you don’t do options, buy the ProShares Short Russel 2000 ETF outright.
With corporate earnings forecasts turning negative, sky-high valuations, and no economic stimulus on the horizon, it is a bet I am willing to make. I’m tired of waiting for a China trade deal. So is everyone else.
Here are the specific trades you need to execute this position:
Buy 23 April 2019 (IWM) $165 puts at………….………$13.00
Sell short 23 April 2019 (IWM) $160 puts at.………...$8.40
Net Cost:………………………….………..………...……..….....$4.60
Potential Profit: $5.00 - $4.60 = $0.40
(23 X 100 X $0.40) = $920 or 8.70% in 31 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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.