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. This is your chance to ‘look over’ John Thomas’ shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Trade Alert – (SPY)
Sell the SPDR S&P 500 (SPY) February, 2013 $135-$140 call spread at $4.93 or best
Closing Trade-not for new readers
expiration date: 2-15-2012
Portfolio weighting: 30%
Number of Contracts = ($10,000/100/$4.93) = 70 contracts
Nothing like starting out the new year with a home run. Only 16 trading days into 2013, and our largest position has soared 14.4%, from $4.31 to $4.93. The S&P 500 has risen almost every day, adding some 3.3% since January 2. Ahhh, the wonders of leverage, when it works.
At this point we have reaped 90% of the maximum expiration value of this position of $5.00, which still has three weeks to run. So I am going to take the money and run.
That will free up capital and allow me to roll up and out into the SPDR S&P 500 (SPY) March $140-$145 call spread. If you want to know why, read today’s newsletter entitled “SPX 1,600 Here We Come.” If this trade succeeds, it should increase our portfolio by another 3.90% with the same 30% capital weighting. I’ll send out a trade alert when I execute, which should be shortly.
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 place orders for the legs individually or you will end up losing much of your profit up front.
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 70 February, 2013 (SPY) $135 calls at………………………$15.03
Buy 70 to cover Short 22 February, 2013 (SPY) $140 calls at …….$10.10
Profit: $4.93 – $4.31 = $0.62
($0.62 X 100 X 70) = $4,370, or 4.37% for the notional $100,000 model portfolio.