Trade Alert - (IWM) April 10, 2015
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 - (IWM) ? TAKE PROFITS
SELL the Russell 2000 iShares (IWM) April, 2015 $116-$119 deep in-the-money vertical call spread at $2.99 or best
Closing Trade
4-10-2015
expiration date: April 20, 2015
Portfolio weighting: 10%
Number of Contracts = 39 contracts
The Russell 2000 iShares (IWM) April, 2015 $116-$119 deep in-the-money vertical call spread is showing a middle market price on my screen of $2.99 right now, a penny short of it?s maximum theoretical value, so it is time to go.
Happy Trade Alert followers earned a tidy 16.3% profit on this position in only two weeks, adding 1.63% to the return of your total $100,000 portfolio.
Don?t hold me to these prices. They are ballpark estimates, at best. The spread on deep in the money are wide.
But if you place a limit order close to my price, you should get done. If not, then keep moving it down in penny increments until you get done, or wait until Monday.
The other choice it to keep the position, run it five more trading days into the April 17 expiration, and avoid paying the exit commissions. I doubt that the (IWM) is going to plunge $6.7 points by next Friday, unless we get a 9/11 type event.
Here are the many bets that came right when I shot out this Trade Alert during the uncertainty of March:
1) The market went quiet into the run up to the US April 15 tax payment deadline.
2) Small caps outperformed large caps.
3) Small caps did well, even though the dollar approached a new eight year high against the Euro.
4) Believe it or not, US institutional investors are still underweight stocks and overweight bonds, and therefore, stocks have to go up.
5) The US would reach a peace deal with Iran, giving a further long term boost to US stocks.
6) All of the rest of the international garbage going on out there amounts to absolutely nothing for the stock market.
If you bought the Russell 2000 Ultra Fund ETF (UWM) instead of the options, take profits now if you are a short-term trader, but hold on if you are a long-term investor. It is just a matter of time before small caps break to new all time highs.
Please click here at http://www.proshares.com/funds/uwm.html for the precise details of the leveraged ETF.
There is no doubt that a major, multi year upside breakout is taking place in US small cap stocks. Check out the chart below for the iShares Core S&P Small Cap ETF (IJR).
Small cap stocks are the bigger beneficiaries of cheap oil, but are not adversely affected by the weak euro. Therefore, I expect the (IWM) to lead the market in 2015, handily outperforming the big cap S&P 500, which is being dragged down by the energy sector.
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.
If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Sell 39 April, 2015 (IWM) $116 calls at?????$9.67
Buy to cover short 39 April, 2015 (IWM) $119 calls at..??.$6.68
Net Cost:??????????????????.....$2.99
Profit: $2.99 - $2.57 = $0.42
(39 X 100 X $0.42) = $1,638 or 1.63% profit for the notional $100,000 portfolio.
