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.
SELL the Wal-Mart (WMT) August 2019 $114-$117 in-the-money vertical BEAR PUT spread at $2.90 or best
Closing Trade
8-12-2019
expiration date: August 16, 2019
Portfolio weighting: 10%
Number of Contracts = 40 contracts
This option spread expires on Friday, but Wal-Mart (WMT) earnings are out Thursday morning. So, I am going to take the bird in the hand rather than going for the 1.2 birds in the bush.
I am therefore selling the Wal-Mart (WMT) August 2019 $114-$117 in-the-money vertical BEAR PUT spread at $2.90 or best. By coming out here you get to take home 80% of the maximum potential profit. That amounts to $1,600 or 16% in six trading days, certainly nothing to sneeze at.
Which company has one of the largest shares of products imported from China? That would be Wal-Mart, which I have always referred to the local Chinese embassy.
Trump’s order to raise tariffs on the last $300 billion of Chinese imports will hit (WMT) squarely in between the eyes. Their profit margins are so small that they will be vaporized by a 10% increase in cost, which they will be unable to pass on in this Amazoned world. They are already the largest minimum wage employer in the US so there certainly isn’t room to cut wages.
On the other hand, the president might announce that he is satisfied with progress in the talks and delay the tariff rise by three months, six months, a year, or forever. Nobody knows anything.
This was a bet that the Wal-Mart (WMT) would not trade above $114 by the August 16 option expiration day in 10 trading days.
Here are the specific trades you need to execute this position:
Sell 40 August 2019 (WMT) $117 puts at………….………$11.00
Buy to cover short 40 August 2019 (WMT) $114 puts at…….$8.10
Net Cost:………………………….………..………….….....$2.90
Profit: $2.90 - $2.50 = $0.40
(40 X 100 X $0.40) = $1,600 or 16% in 6 trading days.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bear Put Spread” by clicking here at
http://www.madhedgefundtrader.com/ltt-vbpds/
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.
