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 – (XLK)
Buy the Technology Select Sector SPDR (XLK) January, 2014 $33-$35 call spread at $1.48 or best
expiration date: January 17, 2014
Portfolio weighting: 10%
Number of contracts = 68 contracts
OK, Ben. I get the message. You don’t have to tell me twice. Here we go!
Please note that a basket of stocks is going to deliver half the volatility of single stocks. Therefore, we have to be more aggressive with the positioning to make any money, picking strikes that are closer to the money. For a list of the largest components of this ETF, please click here at https://www.spdrs.com/product/fund.seam?ticker=XLK. Please note that a hefty 14% of this fund is invested in the shares of Apple (AAPL), which is fine with me.
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:
Buy 68 January, 2014 (XLK) $33 calls at……………$1.81
Sell short 68 January, 2014 (XLK) $35 calls at..…….$0.33
Profit at expiration: $2.00 – $1.48 = $0.52
(68X 100 X $0.52) = $3,568 or 3.57% profit for the notional $100,000 portfolio.