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 - (USO) – TAKE PROFITS
SELL the United States Oil Fund (USO) October 2019 $14 - $15 in-the-money vertical BEAR PUT spread at $0.99 or best
Closing Trade
9-25-2019
expiration date: October 18, 2019
Portfolio weighting: 10%
Number of Contracts = 114 contracts
Since we added our short position in oil seven trading days ago, the price of the commodity has collapsed by 12.15%, an incredible move in this market. Order has been restored to the Middle East, at least temporarily. Our call spread middle market is indicated at its maximum expiration value of $1.00.
I am therefore selling the United States Oil Fund (USO) October 2019 $14-$15 in-the-money vertical BEAR PUT spread at $0.99 or best. The risk-reward of carrying the position for three more weeks until the October 18 option expiration is no longer favorable.
By coming out here, you get to book a profit of $1,368 or 13.79% in 7 trading days. You also get to go 100% cash at a time when global markets, in general, are in an incredibly risky position on the eve of a recession. In case there is another attack in Saudi Arabia, you are perfectly positioned to go back in on the short side. The global glut in oil continues, and consumption is falling off a cliff.
This was a bet that the United States Oil Fund (USO) would not trade above $14.00 by the October 18 option expiration day in 24 trading days. That would require the price of oil to rise by another 10.23% from the then current level, from $60.34 to $67.76.
To do that, oil would have to rocket to a new one-year high in the next five weeks.
Here are the specific trades you need to execute this position:
Sell 114 October 2019 (USO) $15 puts at………….…........……$3.40
Buy to cover short 114 October 2019 (USO) $14 puts at…….$2.41
Net Proceeds:……….………….………..…………................….....$0.99
Profit: $0.99 - $0.87 = $0.12
(114 X 100 X $0.12) = $1,368 or 13.79% 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.
