Trade Alert (SPY) #3 - January 14, 2016
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 - (SPY)- TAKE PROFITS
SELL the S&P 500 SPDR?s (SPY) February, 2016 $190 Puts outright at $5.70 or best
Closing Trade
1-14-2016
expiration date: February 19, 2016
Portfolio weighting: 5%
Number of Contracts = 13 contracts
The S&P 500 SPDR?s (SPY) February, 2016 $190 Puts did their job here. They hedged out most of the downside risk in our (SPY) January $185-$190 vertical bull call debit spread.
It certainly proved handy to have on Wednesday, when the stock market suffered an incredible $61 handle intraday reversal.
It also provided insurance against a flash crash, although one never occurred. You never complain when you buy fire insurance and your house doesn?t burn down.
Now that the (SPY) January $185-$190 vertical bull call debit spread is gone, there is no need to carry the additional risk of keeping the $190 puts. We have a huge profit here, which I would rather take. So I am selling the position.
I don?t want to run a big outright naked short here in the wake of such a calamitous decline in the S&P 500. Better to wait for the next $500 point short covering rally and reestablish higher up.
Don?t count on this happening every time. It was a case of the harder I work, the luckier YOU get.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of optionshouse.
If you are uncertain on how to execute an options trade, please watch my training video on ?How to Execute a Bull Call Spread? by clicking here at https://www.madhedgefundtrader.com/ltt-executetradealerts/. You must me logged into your account to view the video.
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.
Here are the specific trades you need to execute this position:
Sell 13 February, 2016 (SPY) $190 puts at????.?.??$5.70
Profit: ($5.70 - $3.88) = $1.82
($1.82 X 13 contracts X 100) = $2,366, or +2.37% for the notional $100,0000 model trading portfolio.
