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.
Sell the Microsoft (MSFT) March, 2012 $28-$30 Call Spread for a net price of $1.96 or best
expiration date: 3-17-2012
Portfolio weighting: 10% when in the money
($10,000/100/$1.96) = 54 Contracts
To execute this trade you must open two positions simultaneously:
1) Buy The (MSFT) March, 2012 $28 calls at $3.80
2) Sell Short the (MSFT) March, 2012 $30 call at $1.84
Note: This alert is for existing holders to come out. It is not a new position to open.
Having caught a $1 appreciation in the price of Microsoft shares in the past eight days, I am going to take profits on the March, 2012 $28-$30 call spread. Of the 15 cent maximum potential profit in this position, I can realize 11 cents, or 73% at today's prices.
My experience is that it is not worth running these spreads into expiration just for the sake of reaping the last few pennies in the trade. It is amazing how often dramatic surprises occur in the last few days going into expiration, at your expense. The stock market generally is also greatly overextended, especially the technology sector, and I would hate to see this profit go up in smoke with so little left yet to gain.
So discretion is the better part of valor. Coming out here also gives me the opportunity to go back in if we see any weakness in coming days while rolling my expiration out to April.
Here is the P&L on the trade.
March $28 call sale.....................$3.80
March $30 call short cover..........-$1.84
Net proceeds............................ $1.96
Net profit: $1.96 proceeds - $1.85 cost = $0.11
($0.11 X 100 X 54) = $594, or 0.54% for a $100,000 model portfolio