Follow Up to Trade Alert - (GM) March 11, 2014
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.
Further Update to: Trade Alert -(GM) - Stop Loss
Sell the General Motors (GM) April, 2014 $34-$36 bull call spread at $1.11 or best
Closing Trade
3-11-2014
expiration date: April 18, 2014
Portfolio weighting: 10%
Number of Contracts = 57 contracts
Ouch. To get snakebit twice in two days hurts. But three times?
I thought that when the General Motors (GM) ignition recall was announced last week, it was a nice entry point on the long side. I was right for at least a whole day.
This morning news hit that there would be a congressional investigation of GM?s handling of the issue. Usually these are no big deal, go nowhere, and have little impact on the stock. But then we learned that prosecutors in New York State were planning a criminal investigation of the company, as are other states. That is a big deal.
This all happened against a backdrop of deteriorating economic news from China and endless, frightful rumors from the Ukraine. I sailed right into a perfect storm with this trade.
If you are active in the markets as I, this kind of out of the blue flock of black swans is inevitable. It is a good rule of thumb that when the wheels fall off, cut your capital loss to 3%. That way you live to fight another day, as I plan to do.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the trade to come to you. The middle market is the halfway point between the bid and the offered prices that you see on your screen with your online broker.
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 especially on expiration months farther out.
Here are the specific trades you need to execute this position:
Sell 57 April, 2014 (GM) $34 calls at????????$1.96
Buy to cover short 57 April, 2014 (GM) $36 calls at?...$0.85
Net Cost:????????.???????..??....$1.11
Loss: $1.63 - $1.11 = $0.52
(57 X 100 X -$0.52) = -$2,964 or -2.96% profit for the notional $100,000 portfolio.
