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 2020 $280-$290 in-the-money vertical Bull Call spread at $9.90 or best
Closing Trade
11-4-2020
expiration date: November 20, 2020
Portfolio weighting: 10%
Number of Contracts = 12 contracts
This was a “throw up on your shoes” trade when I added it four trading days ago and markets were in free fall.
Now, it is the easiest trade of the year. Since Friday, the (SPY) has risen a staggering $57, or 20% from the upper $290 strike price.
“Who dares wins” says the British SAS motto.
This was my big election play.
No matter who won the election, interest rates would still be near zero, the Fed would still flood the financial system with cash, and massive stimulus would about to hit the economy.
This is still a liquidity-driven bull market.
With the Volatility Index (VIX) over $40, it was almost impossible to lose money on a short-dated deep-in-the-money call spread.
Stocks were then down 9.8% from their market highs in September. That was not a bad initial long side entry point for what would become a 100% fully invested portfolio in two days. This position also received huge support from the 200-day moving average at $310.29.
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 below $290.00 by the November 20 option expiration day in 15 trading days.
Here are the specific trades you need to exit this position:
Sell 12 November 2020 (SPY) $280 calls at………….….....……$67.00
Buy to cover short 12 November 2020 (SPY) $290 calls at….$57.10
Net Proceeds:………...................………………….………………......$9.90
Profit: $9.90 - $8.90 = $1.00
(12 X 100 X $1.0 0) = $1,200, or 11.23% in 4 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.
