As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert - (XLE)
Sell the Energy Select Sector SPDR (XLE) January, 2014 $83-$86 call spread at $2.66 or best
Closing Trade
1-14-2014
expiration date: January 17, 2014
Portfolio weighting: 10%
Number of contracts= 39 contracts
I am going to take a small profit here on my Energy Select Sector SPDR (XLE) January, 2014 $83-$86 bull call spread. We got a dollar move up in the price of crude this morning, and that is helping this sector. We are also right at-the-money at our upper strike, and it is not worth running the risk of carrying the position into the Friday, January 17 expiration with a full 10% of our capital.
At the beginning of the year, we were almost at the 1.76% maximum profit possible with this position. But progress in the peace talks with Iran in Geneva, the $10 dump in the price in oil it triggered, and the sell off in equities, all conspired to rob us of those gains. The market leaders at the end of 2013 took the biggest hits on Monday, and that included energy (XLE).
If you have a pair of brass cojones, you can run this into the Friday expiration and take the entire 1.76%. As for me, discretion is the better part of valor, and I am heading on the sidelines so I can buy this back on a bigger dip. A profit of 0.43% beats a loss all day long, and there is not enough time to recover if the wheels fall off this position again.
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.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Sell 39 January, 2014 (XLE) $83 calls at?????$3.15
Buy to Cover short 39 January, 2014 (XLE) $86 calls at..??.$0.49
Net Cost:?????????????????.....$2.66
Loss: $2.66 - $2.55 = $0.11
(39 X 100 X $0.11) = $429 or 0.43% profit for the notional $100,000 portfolio.
