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) May 2020 $310-$320 in-the-money vertical BEAR PUT spread at $9.95 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
5-4-2020
expiration date: May 15, 2020
Portfolio weighting: increase from 10%
Number of Contracts = 11 contracts
Stocks are starting to roll over.
We have just caught a hefty 15 point down move in the (SPY) over the last three days. In addition, we have also captured a substantial amount of accelerated time decay since we added this position 15 trading days ago.
By coming out here, you get to capture 94.44% of the maximum potential profit in this spread. The risk/reward of continuing is no longer favorable. You will earn $935, or 9.34% in 9 trading days, not bad in these tempestuous conditions.
I am therefore selling the S&P 500 (SPY) May 2020 $310-$320 in-the-money vertical BEAR PUT spread at $9.95 or best. If you can’t get done at this price, reenter it every day until you do. Eventually, the market will come to you. Or, you can run it into expiration in 9 trading days.
If you bought the ProShares Ultra Short S&P 500 ETF (SDS) outright, keep it. I think we are in for more downside.
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 $310.00 by the May 15 option expiration day. That was up 27 (SPY) points, or $2,000 Dow Average points from there.
Here are the specific trades you need to exit this position:
Sell 11 May 2020 (SPY) $320 puts at………......….…………..…$41.00
Buy to cover short 11 May 2020 (SPY) $310 puts at…….…….$31.05
Net Proceeds:………………………….……..........…..………….….....$9.95
Profit: $9.95 - $9.10 = $0.85
(11 X 100 X $0.85) = $935 or 9.34% in 9 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.
