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 of the S&P 500 (SPY) October 2019 $270-$275 in-the-money vertical bull call spread at $4.98
Closing Trade
10-11-2019
expiration date: October 18, 2019
Portfolio weighting: 10%
Number of Contracts = 24 contracts
I am going to take the home run here and use the 475-point rally in the Dow Average today to take profits in my long in the S&P 500. Extreme optimism has been a great sell this year, just as extreme pessimism has been a fantastic buy. To take advantage of extreme pessimism, you have to have cash.
I am therefore selling the S&P 500 (SPY) October 2019 $270-$275 in-the-money vertical bull call spread at $4.98 or better. By coming out here, you get to reap 96.67% of the maximum potential profit, earning $1,392 or 13.18% in 7 trading days.
This was a bet that the S&P 500 (SPY) would not trade below $275.00 by the October 18 option expiration day in 12 trading days. These strikes also had the additional benefit in that they have huge downside support from the 200-day moving average at $280.94.
Here are the specific trades you need to execute this position:
Sell 24 October 2019 (SPY) $270 calls at……..........……..…$28.00
Buy to cover short 24 October 2019 (SPY) $275 calls at….$23.02
Net Proceeds:……………….………..………….…........................$4.98
Profit: $4.98 - $4.40 = $0.58
(24 X 100 X $0.58) = $1,392 or 13.18% in 7 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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
