When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (FCX) – TAKE PROFITS
SELL the Freeport McMoRan (FCX) February $21-$23 vertical bull call spread at $1.98 or best
Closing Trade
2-10-2021
expiration date: February 19, 2021
Portfolio weighting: 10%
Number of Contracts = 57 contracts
Freeport McMoRan restored its Dividend out of the blue. The move was not expected until later in the year. As a result, we are now a staggering 48% above our upper strike price.
The risk/reward of continuing six more trading days is no longer favorable, with 93% of the maximum potential profit already in hand.
If you can’t get done at my price, let it expire at max profit next week. The harder I work, the luckier I get.
You can’t have a synchronized global economic recovery without a bull market in commodities. Freeport McMoRan is the world’s largest producer of copper and a long time Mad Hedge customer.
The stock has been on a tear since March on the back of record Chinese buying of copper ahead of their economic recovery, which started seven months ago. I believe this move will continue for years. The old high for the stock in the last cycle was $50.
I am therefore selling the Freeport McMoRan February $21-$23 in-the-money vertical Bull Call spread at $1.98 or best. As a result, you get to take home $1,596, or 16.47% in only 7 trading days. Well done, and on to the next trade.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that Freeport McMoRan would not trade below $23 by the February 19 option expiration day in 12 trading days.
Here are the specific trades you need to execute this position:
Sell 57 February (FCX) $21 calls at…….............…….………$10.70
Buy to cover short 57 February (FCX) $23 calls at………....$8.72
Net Proceeds:………..…...................….………..………….….....$1.98
Profit: $1.98 - $1.70 = $0.28
(57 X 100 X $0.28) = $1,596, or 16.47% in 7 trading days
If you are uncertain on how to execute an options spread, please watch my training video by clicking here.
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.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
