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 $370-$375 in-the-money vertical BEAR PUT spread at $4.70 or best
Closing Trade
10-23-2020
expiration date: November 20, 2020
Portfolio weighting: 10%
Number of Contracts = 24 contracts
We are getting closer to the election, so I am going to start paring back my risk. Remember, in 2016 the Dow made a 1,000 point round trip overnight. I want to have maximum dry powder with which to take advantage of any extreme moves.
I am therefore selling the S&P 500 (SPY) November 2020 $370-$375 in-the-money vertical BEAR PUT spread at $4.70 or best. By coming out here you get to take home $1,080, or 10.59% in 5 trading days.
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 $370.00 by the November 20 option expiration day in 24 trading days.
Here are the specific trades you need to exit this position:
Sell 24 November 2020 (SPY) $375 puts at….....……….………$30.00
But to cover short 24 November 2020 (SPY) $370 puts at….$25.30
Net Proceeds:………………………….………..………...........….….....$4.70
Profit: $4.70 - $4.25 = $0.45
(24 X 100 X $0.45) = $1,080, or 10.59% in 5 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.
