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 $365-$370 in-the-money vertical BEAR PUT spread at $4.60 or best
Closing Trade
10-2-2020
expiration date: November 20, 2020
Portfolio weighting: 10%
Number of Contracts = 24 contracts
When the market offers you a gift, you take it. I normally don’t exit trades in a day unless something extraordinary happens.
Trump coming down with Covid-19 adds a whole new level of uncertainty to the market. All future debates have been cancelled. The London betting pools have taken the chances of a Biden win from 60% to 90% overnight.
The Dow Average has dropped 700 points since we added this position yesterday. The Volatility Index (VIX) is through the roof.
I am therefore selling the S&P 500 (SPY) November 2020 $365-$370 in-the-money vertical BEAR PUT spread at $4.60 or best.
By coming out here, you get to take home $960, or 9.52% in one trading day. Well done and on to the next trade.
If you don’t do options and have the bearish ProShares Ultra Short S&P 500 ETF (SDS), sell them.
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 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 exit this position:
Sell 24 November 2020 (SPY) $370 puts at….....……….………$39.00
Buy to cover short 24 November 2020 (SPY) $365 puts at….$34.40
Net Proceeds:………….....................……….………..………….….....$4.60
Profit: $4.60 - $4.20 = $0.40
(24 X 100 X $0.40) = $960, or 9.52% in one trading day.
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.
