Follow Up to Trade Alert - (SPY) August 6, 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 - (SPY)
Sell the S&P 500 (SPY) August, 2014 $202.50-$205 bear put spread at $2.49
Closing Trade
8-6-2014
expiration date: August 15, 2014
Portfolio weighting: 10%
Number of Contracts = 44 contracts
I?ll take the home run, thank you very much. Ten handles in the (SPY) on the downside in ten days totally works for me. We have milked this trade for all it?s worth, so it?s hasta la vista baby! Thank you Vladimir Putin!
This is not a bad place to de-risk on the short side in stocks. Take a look at the charts below, and you will see a convergence of 100 day and 200 day support levels across several asset classes.
Check out the rock solid support level in the (SPY) at $191, and all of a sudden, buying back shorts here at $191.50 looks like a stroke of brilliance.
It is also interesting to see the suddenly despised junk bond ETF (HYG) hold at the 200 day moving average. Stocks and junk bond price movements are very highly correlated. It makes sense that that after showing the most bubbleicious price action, high yield corporate debt led the change on the downside.
By the way, this could also mean that Treasury bonds are about to take a big dump off this morning?s 2.43% yield for the ten year, which is why I?m hanging on to all my short positions there.
We could still see more pain in risk assets. My favorite downside target in the (SPY) is the 200 day moving average at $186. That would give us a top to bottom correction of 6.5% in this cycle, in line with the pullback we saw earlier this year.
That?s where you want to load the boat one more time. When the BSD?s come back from their summer vacations in the Hamptons, Cannes, or Portofino, they are going to quickly realize that stocks have been falling, while earnings have been rising.
That means they are going to be cheaper than they have been at any time in 2014. In a world where there is little else to buy, that is a big deal.
We have just entered a period when the seasonals stronger favor investment in equities. That sets up a yearend rally in the indexes that will not be as big as the melt up we saw in 2013, but will be just as welcome. My 2014 (SPY) target of $210, or $2,100 in the (SPX), may not be so Mad after all.
Yes, I know that geopolitics is still a factor. But it looks like both sides in the Gaza conflict have depleted their stockpiles of stupidity for the time being, so things are about to go quiet there.
Vladimir Putin is also likely to back down in the Ukraine because of that throbbing feeling he is increasingly feeling in his pocketbook. The growing leverage and rising costs in the Russian oil industry mean that the recent $11, or 10%, drop in the price of crude cuts Russia?s revenues by 25%. The recession this will eventually bring could be bad enough to lose a future election.
In the end, that is what this is really all about.
I am already starting to draw up short lists of this to buy on the next turnaround. I?ll shoot out the Trade Alerts when I thing the time is right.
Jim Parker! Get your ass back from Rome, per favore! The gelato can?t be that good!
Keep in mind that the options market is highly illiquid now, so don?t hold me to these prices. They are ballpark estimates, at best. It is clear that these desperate policies are already working.
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. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position on your profit and loss statement:
Sell 44 X August, 2014 (SPY) $205 puts at???????$13.13
Buy to cover short 44 X August, 2014 (SPY) $202.50 puts at?$10.64
Net Cost:???????????????????.....$2.49
Potential Profit: $2.49 - $2.29 = $0.20
Potential Profit = (44 X 100 X $0.20) = $880, or 0.88% for the notional $100,000 portfolio.
