Trade Alert - (SPY) February 11, 2015
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)
Buy the S&P 500 SPDR?s (SPY) February, 2015 $199-$202 in-the-money vertical bull call spread at $2.51 or best
Opening Trade
2-11-2015
Expiration date: February 20, 2015
Portfolio weighting: 10%
Number of Contracts = 40 contracts
It?s rare to see an options spread with only six trading days to expiration offering this much money. But with the Volatility Index (VIX) holding in at a lofty 17.70%, we can take in a nearly 2% profit with a near strike that is a full 2% out of the money.
That means the S&P 500 (SPY) has to drop a hefty $4.6 by Friday next week for you to lose money on this position.
I know that?s not impossible in this uncertain environment. But I think that we are in nothing more than a long, sideways correction in a major long-term major uptrend, so this should work.
You are going to have to be especially vigilant with your stop loss on this one, which I shall put at $202, as there is so little time left to expiration.
The 50 day moving average at $204 should give us plenty of support on the downside, and enough time to make it to expiration and get out whole.
Since this is a big contract and fairly close to the money, there should be plenty of liquidity right up to the last day, if we have to stop out.
You can buy this up to $2.70 and still expect a profit.
If you don't do options, stand aside.? There is not enough risk/reward on this one.
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.
If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Buy 40 February, 2015 (SPY) $199 calls at?????$7.39
Sell short 40 February, 2015 (SPY) $202 calls at..?$4.88
Net Cost:??????????????????.....$2.51
Profit: $3.00 - $2.51 = $0.49
(40 X 100 X $0.49) = $1,960 or 1.96% profit for the notional $100,000 portfolio.
