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 - (SPY) – SELL-STOP LOSS
SELL the S&P 500 (SPY) April 2020 $270-$280 in-the-money vertical BEAR PUT spread at $5.40 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
4-7-2020
expiration date: April 17, 2020
Portfolio weighting: 10%
Number of Contracts = 13 contracts
As much as I hate coming out of this short position, risk control is the order of the day. Normally, selling short a monster two-week 55-point rally is always a winner, especially with only days to expiration.
However, these are anything but normal times. At least, we made huge profits coving most of our shorts on Friday and selling our longs on Monday, so worst case, this one is a push against the others.
I am therefore stopping out of my position and selling the S&P 500 (SPY) April 2020 $270-$280 in-the-money vertical BEAR PUT spread at $5.40 or best
We are about to see a parade of the worst economic numbers in history. How will the market react? Not good, not good.
Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
This was a bet that the S&P 500 (SPY) will not trade above $270.00 by the April 17 option expiration day in 15 days. That was up 26 (SPY) points, or $2,000 Dow Average points from here. AS IT HAPPENS, IT ONLY TOOK TWO DAYS TO COVER THAT GROUND.
Here are the specific trades you need to exit this position:
Sell 13 April 2020 (SPY) $280 puts at………….……............…$17.00
Buy to cover short 13 April 2020 (SPY) $270 puts at…….…….11.60
Net Proceeds:………………………….………..…………...........….....$5.40
Loss: $8.50 - $5.40 = $3.10
(13 X 100 X $3.10) = $4,030 or 36.47%.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bear Put Spread” by clicking here.
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.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
