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) – STOP LOSS
SELL the S&P 500 (SPY) September 2020 $355-$360 in-the-money vertical BEAR PUT spread at $3.00 or best
Closing Trade
9-2-2020
expiration date: September 18, 2020
Portfolio weighting: 10%
Number of Contracts = 24 contracts
We now appear to be in a one-way market to the upside.
The Fed’s decision last Thursday to change its inflation target has enormous consequences for the stock market. It will keep flooding the financial market with new waves of quantitative easing until we average inflation at 2%, no matter the price! That means superheating the economy.
As a result, stocks are now more overbought than at any time since the 2000 Dotcom bubble top. Apple (AAPL) is now an unprecedented 50% over its 200 day moving average and is trading at a 42 times price earnings multiple.
And while market bottoms are easy to identify through valuation measures, tops are impossible to peg, since greed is immeasurable.
We only have 11 trading days left until the next options expiration.
I am therefore selling the S&P 500 (SPY) September 2020 $355-$360 in-the-money vertical BEAR PUT spread at $3.00 or best.
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 $355.00 by the September 18 option expiration day in 24 trading days. That was up 18 (SPY) points, or $1,200 Dow Average points from here.
Here are the specific trades you need to exit this position:
Sell 24 September 2020 (SPY) $360 puts at………....….………$9.50
Buy to cover short 24 September 2020 (SPY) $355 puts a….$6.50
Net Proceeds:…………….……..................………..………….….....$3.00
Loss: $4.40 - $3.00 = -$1.40
(24 X 100 X -$1.40) = -$3,360.
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.
