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) - BUY
BUY the S&P 500 (SPY) November 2020 $365-$370 in-the-money vertical BEAR PUT spread at $4.20 or best
Opening Trade
10-1-2020
expiration date: November 20, 2020
Portfolio weighting: 10%
Number of Contracts = 24 contracts
Yes, I know we are in a liquidity-driven bull market.
But when volatility is rising when the market is rising, you want to run a mile. The Volatility Index (VIX) is up an eye-popping 10% today.
Stocks are now more expensive than they were in January, and the most expensive since the 2000 Dotcom Bubble top.
Government bailout money has dried up. What has been handed out has been done so incompetently. Only 6% of small companies were able to qualify for the Paycheck Protection Program. States are running out of money to pay unemployment benefits.
It’s right when the market appears unstoppable that it rolls over and dies.
I am therefore buying the S&P 500 (SPY) November 2020 $365-$370 in-the-money vertical BEAR PUT spread at $4.20 or best.
Don’t pay more than $4.50 or you’ll be chasing.
If you don’t do options, take a look at the bearish ProShares Ultra Short S&P 500 ETF (SDS).
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This is a bet that the S&P 500 (SPY) will not trade above $365.00 by the November 20 option expiration day in 35 trading days. That is up 29 (SPY) points, or $2,215 Dow Average points from here.
Here are the specific trades you need to execute this position:
Buy 24 November 2020 (SPY) $370 puts at………….…….…$34.50
Sell short 24 November 2020 (SPY) $365 puts at………….$30.30
Net Cost:…………………...............……….………..………….….....$4.20
Potential Profit: $5.00 - $4.20 = $0.80
(24 X 100 X $0.80) = $1,920 or 19.04% in 35 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.
