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 - (XLK)
Sell the Technology Select Sector SPDR (XLK) January, 2014 $33-$35 call spread at $1.98 or best
Closing Trade
1-14-2014
expiration date: January 17, 2014
Portfolio weighting: 10%
Number of contracts = 68 contracts
My bet that the technology sector (XLK) would outperform the market through the yearend and beyond has paid off big time. By going with an aggressive short dated, at-the-money call spread, I was able to haul in a hefty 3.40% profit on this one. Given the heightened volatility in the market, I am going to take the money here, rather than run it into expiration in three days just to capture an extra 14 basis points in profit.
I also may have some scary positions that are just out of the money and may cost me some money by the Friday close, such as in the (TLT) and the XLE). So it is better to book profit here to offset some future potential losses. It?s all about risk control.
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:
Buy 68 January, 2014 (XLK) $33 calls at?????$2.45
Sell short 68 January, 2014 (XLK) $35 calls at..??.$0.47
Net Cost:?????????????????.....$1.98
Profit: $1.98 - $1.48 = $0.50
(68X 100 X $0.50) = $3,400 or 3.40% profit for the notional $100,000 portfolio.
