Trade Alert - (GS) October 5, 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

 

Trade Alert - Goldman Sachs (GS) - BUY

BUY the Goldman Sachs (GS) October, 2017 $227.50-$232.50 in-the-money vertical bull call spread at $4.50 or best

Opening Trade

10-5-2017

expiration date: October 20, 2017

Portfolio weighting: 10%

Number of Contracts = 22 contracts

 

With the bond market absolutely breaking down, you must double up your long position in Goldman Sachs (GS).

Financials love rising interest rates.

This is a perfect example of parallel trading, which I wrote about in today's letter.

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

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.

Then we got the Republican tax package.

Even if it is passed in six months in greatly diluted form, it is still market positive. Means of financing the cuts have yet to be released, so you can expect that enormously increased government BORROWING will be a major element.

So I am going BUY the Goldman Sachs (GS) October, 2017 $227.50-$232.50 in-the-money vertical bull call spread at $4.50 or best

This is a bet that (GS) will not trade below $232.50 by the October 20expiration in 11 trading days.

The options market is more illiquid than usual today and trading spreads are wide. Don't pay more than $4.65 for the spread or you'll be taking on too much risk.

If you can't buy options I think its pretty safe to buy 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, with 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

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

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

Buy 22 October, 2017 (GS) $227.50 calls at............................... $16.85
Sell short 22 October, 2017 (GS) $232.50 calls at..............................$12.35
Net Cost:..............................................................................................$4.50

Potential Profit: $5.00 - $4.50 = $0.50

(22 X 100 X $0.50) = $1,100 or 11.11% 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 Credit and 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.