Trade Alert - (SPY) April 7, 2020

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.

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.