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 - (ROM) – EXPIRATION AT MAX PROFIT
EXPIRATION of the ProShares Ultra Technology Fund (ROM) November 2021 $105-$110 vertical bull call spread at $5.00 or best
Closing Trade
11-18-2021
expiration date: November 19, 2021
Portfolio weighting: 10%
Number of Contracts = 25 contracts
We have an abundance of riches this month!
I am going to run the P&L on this position now, so I don’t overwhelm you and my staff with a record ten closing trade alerts at the Friday close.
My bet that interest rates would soar, taking financial stocks with them, has proved wildly successful.
I think it is therefore safe to call this position a win, even though the actual November 19 options expiration is not until Friday at 4:15 PM EST.
We are so far in the money that we have an ample cushion going into expiration.
Since we added this position, shares of (ROM) have gone ballistic.
It also helped that we caught the top of the move in the Volatility Index (VIX) at a $25-$29 top when we added this position. Today, the (VIX) is only at $17.
Therefore, we get to take home the maximum profit in this position, such is the magic of vertical bull call debit spreads. That means you get to take home $2,500 or 25.00% in 14 trading days.
Well done and on to the next trade!
You don’t have to do anything with this expiration.
Your broker will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning November 22 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
I just analyzed the charts of the 30 largest holdings of the (ROM) and what I saw amazed me. Half had been trashed over the past six months, down 30% or more. Half were at all-time highs, like Microsoft (MSFT) and (GOOGL).
What happens next when we enter the seasonally strongest six months of the year? The stocks that went down start to go up because they are cheap. The stocks that are at highs go higher because they have the winning business models.
Cash is trash.
And here’s the kicker.
Rare for ETFs and other baskets of stocks, it has double the volatility of an individual component instead of the usual half. That presents outsize returns for call spreads, both the front month and the long-dated ones all the way out to May 2022 expirations.
The good thing about this timing is that all the big tech earnings came out last week, so there are no potential downside surprises left. (MSFT) and (GOOGL) were great, while (AAPL) and (AMZN) bombed.
To see (ROM) top holdings, please click here.
This was a bet that (ROM) would not trade below $110 by the November 19 option expiration day in 14 trading days.
Here is the specific accounting you need to close out this position:
EXPIRATION of 25 November 2021 (ROM) $105 calls at……..………..…$22.61
EXPIRATION of short 25 November 2021 (ROM) $110 calls at………....$17.61
Net Proceeds:…………………..…….….....………..………….........………….......$5.00
Profit: $5.00 - $4.00 = $1.00
(25 X 100 X $1.00) = $2,500 or 25.00% in 14 trading days.
