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 – (AAPL)
Sell the (AAPL) January, 2013 $450-$500 Bull Call Spread at $47.15 or best
Closing Trade-Not to be initiated by new subscribers
expiration date: 1-18-2013
Portfolio weighting: decrease from 20% to 10%
= 3 Contracts
I still think Apple is the world greatest company and will go higher. But the stock has just rocketed by $85 since my November 15 opening trade alert, creating some $93 billion in new market capitalization. This is the most in history by any company over 6 ½ trading days. We have milked this position for 73% of its potential profit and there is no point in carry on with it for another two months to the January expiration to capture the balance. Better to free up cash here and go back in with a more aggressive position on the next dip.
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 buy the legs individually or you will end up losing much of your profit up front. If you don’t get filled, then just wait for the next Trade Alert. There will be many fish in the sea.
The same applies if, for any reason, you don’t understand this trade. Better to watch this strategy unfold on paper in the model portfolio before you try it with real money.
Keep in mind that these are ball park prices only. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this profitable position:
Sell 3 X (AAPL) January, 2013 $450 Calls at……………………..…. $137.00
Buy to cover short 3 X (AAPL) January, 2013 $500 calls at………….-$89.85
Net Proceeds………………………………………….…………. $47.15
Profit = $47.15 – $39.60 = $7.55
($7.55 X 100 X 3) = $2,265, or 2.27% for the notional $100,000 model portfolio.