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 SPDR S&P 500 ETF (SPY) February, 2017 $233-$236 in-the-money vertical bear put spread at $2.56 or best
Expiration Date: February 17, 2017
Portfolio Weighting: 10%
Number of Contracts = 37 contracts
This was a bet that SPY would not trade above $233 by the February 17th expiration.
We are getting too close to the near strike, so prudent risk control demands that I bail out on this position.
I am therefore selling the SPDR S&P 500 ETF (SPY) February, 2017 $233-$236 in-the-money vertical bear put spread.
Our short position in the $233 puts mitigated most of the loss in this trade.
This was originally a hedge against our long in the Goldman Sachs (GS) February, 2017 $222.50-$227.50 in-the-money vertical bull call. We earned a generous 26.15% profit in only five trading days on this position last Friday.
More presidential tweets about potential future tax cuts is what derailed this trade. Still, net net, we are a big winner on the two. This is a perfect example of how "markets can stay irrational longer than you can stay solvent".
Up 26.15% on one trade, down 5.88% on the other? Ill take that all day long.
You see, there is a method to my madness.
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 about how to execute this options spread, please watch my training videoHow to Execute a Vertical Bear Put Debit Spread.
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.
Dont execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile with only 4 days to expiration.
Please keep in mind these are ballpark prices at best. After the text alerts go out, prices can be all over the map. There is no telling how much the market will have moved by the time you get this email.
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Here Are the Specific Trades You Need to Execute This Position:
Sell 37 February, 2017 SPY $236 Puts at . . $3.60
Buy to cover short 37 February, 2017 SPY $233 Puts at
Net Proceeds: ......$2.56
Loss: $2.56 - $2.72 = -$0.16
(37 X 100 X -$0.16) = -$592 or 5.88% loss