Trade Alert - (SPY) December 18, 2018 - BUY
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.
BUY the S&P 500 (SPY) January 2019 $230-$240 in-the-money vertical BULL CALL spread at $9.00 or best
Opening Trade
12-18-2018
expiration date: January 18, 2019
Portfolio weighting: 10%
Number of Contracts = 11 contracts
With the Mad Hedge Market Timing Index at 5, a 30-year low, there is nearly a 100% chance that this will be a successful trade. If you don’t use a “BUY” signal this strong, you might as well take your entire trading strategy and throw it in the trash.
I am therefore buying the S&P 500 (SPY) January 2019 $230-$240 in-the-money vertical BULL CALL spread at $9.00 or best.
This is a bet that the S&P 500 (SPY) will not trade below $240 by the January 18 option expiration day in 20 trading days. That is a level 6.25% down from the current price.
That would bring the total correction to 18.08% from the $293 top, highly unlikely with proof of an actual recession. Today, the (SPY) is trading at $256.55.
This is also a very conservative trade. It is very deep-in-the-money, short dated (one month to expiration), and has a $10 spread between the strikes. There are also three public holidays during the life of this position, and generally slow, low-volume trading conditions. That should greatly reduce the day-to-day volatility of your portfolio. Only the extremely elevated levels of market volatility make this trade possible.
Don't pay more than $9.50 or you'll be chasing.
If you don’t do options, buy the (SPY) outright for a quick end of year oversold trading bounce.
Here are the specific trades you need to execute this position:
Buy 11 January 2019 (SPY) $230 calls at………….………$27.00
Sell short 11 January 2019 (SPY) $240 calls at……...$18.00
Net Cost:………………………….………..………….….....$9.00
Potential Profit: $10.00 - $9.00 = $1.00
(11 X 100 X $1.00) = $1,100 or 11.11% in 20 trading days.
To see how to enter this trade in your online platform, please look at the order ticket above, 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 Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.