Trade Alert - (GS) October 12, 2017

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.


Alert

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Trade Alert - Goldman Sachs (GS) TAKE PROFITS

SELL the Goldman Sachs (GS) October, 2017 $220-$225 in-the-money vertical bull call spread at $4.90 or best

Closing Trade-NOT FOR NEW SUBSCRIBERS

10-12-2017

expiration date: October 20, 2017

Portfolio weighting: 10%

Number of Contracts = 23 contracts

 

With the markets now more overbought than at any time in the last 17 years, I am going to start taking money off the table.

I am therefore taking profits in my position in the Goldman Sachs (GS)October, 2017 $220-$225 in-the-money vertical bull call spread at $4.90 or best

Get anywhere close to the price and you will have captured 87.18% of the maximum potential profit.

Your 11 day profit comes to a very healthy 15.74%.

The risk/reward of continuing for the remaining six trading days until the October 20 options expiration is no longer favorable.

I thought the upside breakout in Goldman Sachs (GS) is so obvious here that it is worth playing, even at these elevated process.

You can thank the collapse of the bond market, which is causing yields to soar, something all financials love.

Fixed income markets have been hit by both barrels of a shotgun.

Fed governor Janet Yellen released the schedule for selling her $4 trillion bond hoard, some $6 billion a month, or $200 million a day.

Even the Republican tax package is passed in six months in greatly diluted form, it is still market positive. Means of financing the cuts have yet to be released.

This was a bet that (GS) will not trade below $225 by the October 20 expiration in 17 trading days. It worked.

If you didn't buy options I think its pretty safe to keep the stock on a medium term view. I think (GS) can double from here over the next three years.

After six months of hibernation, I think the banks are about to make a big move.

They are a classic laggard sector, which newly freed FANG money would love to rotate into.

Interest in buying technology stocks up 40% on the year is waning, making the sector ripe for a rotation.

A long in Goldman Sachs would be a nice hedge against any such rapid sector rotation

As our profitable short position in the US Treasury bond market (TLT) is screaming at us, the bond market may have peaked for the year this week, and financials love rising rates.

Banks also passed their stress test with flying colors. They are now well capitalized enough to handle TWO 2008 type financial crisis.

This is the Federal Reserve's the Comprehensive Capital Analysis and Review, otherwise known as CCAR.

Don't forget also that banks are major deregulation beneficiaries.

Here are the specific trades you need to execute this position:

Sell 23 October, 2017 (GS) $220 calls at...............................................$23.00
Buy to Cover short 23 October, 2017 (GS) $225 calls at............................$18.10
Net Proceeds:...........................................................................................$4.90

Profit: $4.90 - $4.32 = $0.68

(23 X 100 X $0.68) = $1,564, or 15.74% profit in 11 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.

You must be logged into your account to view the video.

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.

Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.

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.