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) June 2020 $315-$325 in-the-money vertical BEAR PUT spread at $9.85 or best
Closing Trade
5-13-2020
expiration date: June 19, 2020
Portfolio weighting: 10%
Number of Contracts = 11 contracts
My long and hard-earned experience has brutally taught me that when you earn 81.25% of the maximum potential profit in a position in only three days, you fall down on your knees, thank God, and take it.
Besides, we went into today’s meltdown 100%-invested and we have to make room for our new long in Walt Disney by the end of today. We did manage to capture an impressive $10 of downside in only three trading days.
I am therefore selling the S&P 500 (SPY) June 2020 $315-$325 in-the-money vertical BEAR PUT spread at $9.85 or best
The risk-reward of continuing is no longer favorable. By coming out here, you get to take home $715, or 8.69% in only 3 trading days. Well done, and on to the next trade.
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 $315.00 by the June 19 option expiration day in 29 trading days. That was up a safe $27 (SPY) points, or $2,000 Dow Average points from here.
Here are the specific trades you need to exit this position:
Sell 11 June 2020 (SPY) $325 puts at…......……………..………$45.00
Buy to cover short 11 June 2020 (SPY) $315 puts at………….$35.15
Net Proceeds:………..........………………….………..………….….....$9.85
Profit: $9.85 - $9.20 = $0.65
(11 X 100 X $0.65) = $715 or 8.69% in 3 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.
