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) – BUY
BUY TO COVER SHORT in the Freeport McMoRan (FCX) April 2019 $14.00 CALLS at $0.10 or best
Closing Trade
3-29-2019
expiration date: April 18, 2019
Portfolio weighting: 10%
Number of Contracts = 110 contracts
Having sold our long position in the Freeport McMoRan (FCX) April $10-$11 vertical BULL CALL spread, we are also obliged to take profits in our short position in the Freeport McMoRan (FCX) April $14.00 CALLS.
I never run naked short positions in calls or puts, which I characterize as picking up pennies in front of a steam roller. It’s just a matter of time before you get run over.
This position was a double play in that I expected (FCX) shares to rise slowly or go nowhere, and for market volatility to decline. As it happened, both took place.
The $14 call options we sold for a lofty $0.18 three weeks ago are now worth only $0.10. If you can’t get done at this price, keep raising your bid a penny at a time until you are. You MUST be out of this position by the market close this afternoon or your broker will have a heart attack. There’s no way your margin clerk wants you to run this position naked overnight. I don’t either.
With interest rates worldwide falling off a cliff, and all major central banks now looking to stimulate their economies, I believe the “RISK ON” environment will continue for both stocks AND bonds. This is how decade low liquidity-driven stock markets always end.
The Fed governor gave us a double dose of stimulus. He indicated that there would be no more interest rate rises in 2019. He also said that the Fed balance sheet unwind would end at $2.7 trillion versus the zero that was expected only two months ago. The net effect is to inject another $2.7 trillion into the US economy.
Here are the specific trades you need to exit this position:
Buy to cover short 110 April 2019 (FCX) $14.00 calls at…………$0.10
Profit: $0.18 - $0.10 = $0.08
(110 X 100 X $0.08) = $880 or 44.44% in 9 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
