Trade Alert – (SPY) October 31, 2012

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)

Buy the SPDR S&P 500 (SPY) January, 2013 $131-$136 deep-in-the-money call spread at $4.04 or best

Opening Trade

10-31-2012

expiration date: 1-18-2013

Portfolio weighting: 20%

Number of Contracts = ($20,000/100/$4.04) = 50 contracts

I think we are setting up for a nice post-election rally that could well last until the end of 2012, so I am going to start scaling into “RISK ON” positions today.

Thanks to Hurricane Sandy, liquidity in the options market is about nil, so I am going to kick off with a long position in the most liquid contract in the market, the SPDR S&P 500 (SPY). By picking up the January, 2013 $131-$136 deep-in-the-money call Spread at $4.04 or best, we have room to take some heat in any volatility that may follow Election Day and still keep our maximum profit. The upper $136 strike also fits nicely below major support for the (SPY) just below the 200 day moving average.

For a major, in depth explanation of why I believe “RISK ON” is he way to go here, please read my My 2012-2013 Stock Market Forecast, which should be in your inbox tomorrow morning, provided that you have electricity.

Buy 50 January, 2013 (SPY) $131 Calls at……………$11.29
Sell Short 50 January, 2013 (SPY) $136 Calls at…….$7.25
Net Cost:……………………………….………………….$4.04

Maximum potential profit at expiration:
$5.00 – $4.04 = $0.96

($0.96 X 100 X 50) = $4,800 – 4.80% for the notional $100,000 model portfolio.

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