Trade Alert - (BAC) Expiration December 22, 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.
Trade Alert - (BAC) - EXPIRATION
Expiration of the Bank of America (BAC) December, 2014 $15-$16 in-the-money vertical call spread at $1.00
Closing Trade ? NOT FOR NEW SUBSCRIBERS!
12-22-2014
Expiration date: November 21, 2014
Portfolio weighting: 10%
Number of Contracts = 110 contracts
My bet that Bank of America (BAC) shares would go up, sideways, or down small from December onward proved dead on correct.
We got an assist from one of the most ferocious stock market rallies in history. Despite all of the violence in the markets, the volatility of our vertical call spread remained muted, and our capital at risk limited, as it was supposed to.
It did this despite the fact that ten-year Treasury bond yields collapsed from 2.39% to 2.06%, which is usually terrible new for financial shares. It is a classic trader?s nostrum that if you throw bad news on the stock and it fails to go down, you buy the heck out of it.
(BAC) delivered in spades. I believe that financials will be one of the top performing sectors of 2015, and am eager to get back in on the next dip. American interest rates may not go down tomorrow, but they will someday, especially now that the Federal Reserve is opening advertising a June 2015 interest rate hike. When they do, (BAC) shares will triple over a period of years.
The annoying thing about risk control is that sometimes, it can cost you a lot of money. The risk of market volatility forced me out of my long vertical call spreads in Alibaba (BABA) and Solar City (SCTY).
In the end, I proved correct on my calls on both companies, believe they will be big performers in 2015, but was not willing to pay the price to get there. If I had kept the positions, they would have added a hefty 9.2% to my year-to-date performance by Friday. It would now be 42%, instead of 33%.
Welcome to show business. You can?t always count on one of the biggest two day rallies in history to randomly come along and bail you out of a losing position on expiration day.
Your broker should credit the full profit for the (BAC) position in your account this morning, and release the margin requirement. If they don?t, you should get on the blower immediately.
Now that you are clocking winners, they will also monitor your account more closely for good ideas they can use elsewhere. But they will never tell you this.
The next thing to do is to pat yourself on the back for a trade well done, and then figure out how to spend the money.
On to the next trade.
Here are the specific prices you can use this position:
Long 110 November, 2014 (BAC) $15 calls at?????$2.62
Short 110 November, 2014 (BAC) $16 calls at..????.$1.62
Net Value:??????????????????.....$1.00
Profit: $1.00 - $0.92 = $0.08
(110 X 100 X $0.08) = $880 or 0.88% profit for the notional $100,000 portfolio.
