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) November 2022 $400-$410 in-the-money vertical bear put spread at $9.70 or best
Closing Trade
11-3-2022
expiration date: November 18, 2022
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I am going to use the impressive 1,200-point dive from yesterday’s high to take profits on my short position in the S&P 500 (SPY).
With 75% of the maximum potential profit in hand and 11 trading days until the November 18 options expiration, the risk/reward of continuing is no longer favorable. Besides, with the Volatility Index (VIX) back down to $26.00, we also get to profit from the sharp decline in volatility from the $32 of weeks ago.
Everything went right with this trade. We caught a major move down in the market, we captured 2 ½ weeks of time decay, and the (VIX) shrank from $33 to $26. It was in effect a triple play.
By coming out here, I am going into a very rare 100% cash position. That allows me to duck two major risk events next week, the Wednesday election results and the CPI report on Thursday. That way I can fade any big moves that take place.
Therefore, I am selling the S&P 500 (SPY) November 2022 $400-$410 in-the-money vertical bear put spread at $9.70 or best.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done, cancel your order and lower your offer by 10 cents with a second order.
This was a short-term options play only.
This was a bet that the S&P 500 (SPY) would not trade above $400.00 by the November 18 options expiration day in 24 trading days.
Here are the specific trades you need to close out this position:
Sell 12 November 2022 (SPY) $410 puts at………...................…$38.00
Buy to cover short 12 November 2022 (SPY) $400 puts at…….$28.30
Net Proceeds:…………………............................……….……….………$9.70
Profit: $9.70 - $8.80 = $0.90
(12 X 100 X $0.90) = $1,080, or 10.22% in 13 trading days.
If you are uncertain about 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.
