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 - (VXX) - BUY
BUY the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) January 2021 $16 calls at $3.40 or best
Opening Trade
1-14-2020
expiration date: January 15, 2021
Portfolio weighting: 5%
Number of Contracts = 14 contracts
Until now, holding off from any hedging transactions has been the wise thing to do.
This week, we get the signing of the Phase One China trade deal, which will be little more than a photo op. Some 90% of China’s imports are still subject to tariffs. Before Trump was elected, the figure was 3%.
It all sets up a classic “buy the rumor, sell the news” type market.
I think the markets are overbought in the extreme. Now, the leaders, like Tesla (TSLA) and Apple (AAPL) are starting to roll over.
The Volatility Index (VIX) is close to trading at a six-month low.
I am therefore buying the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) January 2021 $16 calls at $3.40 or best.
Please note that these options have a one-year maturity. That minimizes time decay, which can be enormous with any kind of volatility trade. We are also close to the money, which makes the $16 strike very sensitive to any kind of increase in volatility.
Don’t pay more than $4.00 or you’ll be chasing.
This is a bet that the iPath Series B S&P 500 VIX Short Term Futures ETN (VXX) will not trade below $16.00 by the January 15, 2021 option expiration day in one year. All you need is a pop any time in the next year, the sooner the better.
If you don’t do options, buy the (VXX) outright for a trade, which is down 55.61% since August.
Here is the specific trade you need to execute this position:
Buy 14 January 2021 (VXX) $16 calls at………….………$3.40
Net Cost:………….......……………….………..………….….....$3.40
Dollar cost = (14 X 100 X $3.40) = $4,760
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.