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.
Further explanation to: Trade Alert - (SPY)
Sell the SPDR S&P 500 (SPY) April, 2013 $145-$150 call spread at $4.97 or best
expiration date: 4-19-2012
Portfolio weighting: 10%
Number of Contracts = 22 contracts
With the (SPY) approaching an all time high, there are just a few pennies to go, I am going to take the money and run on my position in the SPDR S&P 500 (SPY) April, 2013 $145-$150 deep in-the-money bull call spread. At $4.97, there is only 3 cents left in potential profit, and I would have to run the position for another month to get it. We have already captured 93% of the potential profit in this position. The risk/reward here is not longer attractive.
The market is now up ten days in a row, the most since 1996, and has gained every day in March. By freeing up cash here we gain some dry powder to use on any market dips. That is, if they haven’t made selling stocks illegal, which the market apparently thinks they have. It also means you don’t have to rush out and change your underwear every five minutes if one of my predicted black swans comes in for a landing.
There is also the matter that being up 31% so far in 2013, I have outperformed virtually everyone in the hedge fund industry, expect for maybe David Tepper (thanks for the heads up, David!). That means I no longer need to swing for the fences to make my year. Instead, I can settle back into the sort of ultra cautious, scaredy cat, type of trades typical for an investor of my advanced age. That’s is, unless, we get a 5% dip in the market, in which case, it will be pedal to the metal once 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 22 April, 2013 (SPY) $145 calls at……………$11.52
Buy to cover Short 22 April, 2013 (SPY) $150 calls at.…….$6.55
Profit: $4.97 - $4.57 = $0.40
($0.40 X 100 X 22) = $880 – 0.88% for the notional $100,000 model portfolio.