Follow Up to Trade Alert - (FCX) September 18, 2013

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.

Further Update to: Trade Alert - (FCX)

Sell the Freeport McMoRan (FCX) October $28-$30 bull call spread at $1.93 or best

Closing Trade

9-18-2013

expiration date: 10-18-2013

Portfolio weighting: 10%

Number of Contracts = 59 contracts

This has been a real peach of a trade. In just eight days, (FCX) shares have jumped by 8%, taking the Freeport McMoRan October $28-$30 bull call spread from $1.68 to $1.93, a gain of 15%. And we did this by only risking 10% of our capital.

We managed to achieve this profit when the price of copper actually went against us, falling some 3%. Clearly the equity aspect of this position proved more important than the underlying fundamentals.

This is why I endeavor to find trades with multiple reasons to work. Hey, if you can?t skin a cat one way, try another. The dollars are just as good at the bar.

We have harvested 78% of the potential profit on this position, and have a full month to go to capture the rest. On top of that, we have a major market-moving event in two hours. So I am going to keep the gift and take the money and run. The risk/reward ratio has now swung against us. Also, I prefer to have some extra dry powder in case Ben Bernanke shocks us today, whatever the shock may be.

I wish they were all this easy.

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 further out.

Here are the specific trades you need to execute this position:

Sell 59 October, 2013 (FCX) $28 calls at????????....?$5.83
Buy to cover short 59 October, 2013 (FCX) $30 calls at??....?$3.90

Net Proceeds:????????????....??..????.......$1.93

Profit: $1.93 - $1.68 = $0.25

($0.25 X 100 X 59) = $1,475 or ?1.48% for the notional $100,000 model portfolio.

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