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 $305-$315 in-the-money vertical BEAR PUT spread at $9.98 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
5-6-2020
expiration date: May 15, 2020
Portfolio weighting: increase from 10%
Number of Contracts = 13 contracts
I am going to take advantage of the nice little three int dive in the (SPY) to cash out of my short position.
Stocks are now more expensive than they were in January. Government bailout money won’t hit the economy for months. What's handed out has been done so incompetently. Only 6% of small companies were able to qualify for the Paycheck Protection Program before it ran out of money.
I am therefore selling the S&P 500 (SPY) May 2020 $305-$315 in-the-money vertical BEAR PUT spread at $9.98 or best. By coming out here, you get to earn $1,664 or 14.71% in only 13 trading days. You are capturing 98.46% of the maximum potential profit so the risk/reward of continuing is no longer favorable.
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 $305.00 by the May 15 option expiration day in 19 trading days. 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 13 May 2020 (SPY) $315 puts at………..............….………$27.00
Buy to cover short 13 May 2020 (SPY) $305 puts at………….$17.02
Net Proceeds:…………..........……………….………..………….….....$9.98
Profit: $9.98 - $8.70 = $1.28
(13 X 100 X $1.28) = $1,664 or 14.71% in 13 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.
