Follow Up to Trade Alert - (SPY) July 25, 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)
Sent from the Monte Rosa glacier in Switzerland
Buy the S&P 500 (SPY) August, 2014 $200-$202.50 bear put spread at $1.95 or best
7-25-2014
Opening Trade
expiration date: August 15, 2014
Portfolio weighting: 10%
Number of Contracts = 51 contracts
Take a look at the charts below going back three months and three years and you will see we are at the top end of a top end of a range.
The US stock market has not seen a substantial correction since a threatened government default on Treasury bonds sent the (SPX) plunging some 300 points, or 22%, in July, 2011. That makes this the third longest leg up in American stock market history.
The calendar this year particularly favors both a short, and a short volatility trade, with a very early August 15 options expiration. That is just three weeks, or 15 trading days from today.
Because most of our other positions have proved so successful, we have run out of short positions, taking the maximum profit in every case.
Eleven out of the last 12 Trade Alerts have been profitable, and another three winners remain on the books. This has been the most profitable summer since the inception of the Trade Alert service. I could have done better, for lack of adequate broadband in England and Turkey.
That leaves us naked long in our notional trading book. So, in order to balance out our risk exposure we need to add some shorts. The S&P 500 (SPY) August, 2014 $200-$202.50 bear put spread looks like a winner to me.
If you are not able to buy this put option spread, you can protect your US stock positions through buying the ProShares Short S&P 500 ETF (SH), or the ProShares Ultra Short 2X leveraged bear ETF (SDS) (remember those?).
I am not a newborn bear. I just want to protect my existing positions from some long overdue choppiness.
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:
Buy 51 X August, 2014 (SPY) $202.50 puts at.....................$4.88
Sell short 51 X August, 2014 (SPY) $200.00 puts at..........$2.93
Net Cost:..............................................................$1.95
Potential Profit: $2.50 - $1.95 = $0.55
Potential Profit = (51 X 100 X $0.55) = $2,805, or 2.81% for the notional $100,000 portfolio.
