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Trade Alert - (SPY) May 8, 2020 - BUY

Trade Alert

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.


Alert

 

Trade Alert - (SPY) - BUY

BUY the S&P 500 (SPY) June 2020 $315-$325 in-the-money vertical BEAR PUT spread at $9.20 or best

Opening Trade

5-8-2020

expiration date: June 19, 2020

Portfolio weighting: 10%

Number of Contracts = 11 contracts

I don’t believe the stock market is going to hit a new all-time high in the next five weeks. We have just enjoyed a steep $12, or 3% rally in the (SPY) this week, potentially setting up a double top on the charts.

Stocks are now more expensive than they were in January. Government bailout money won’t hit the economy for months. What has been handed out has been done so incompetently.

Only 6% of small companies were able to qualify for the Paycheck Protection program before it ran out of money. Some 52% of all small companies are expected to go bankrupt this year.

I am therefore buying the S&P 500 (SPY) June 2020 $315-$325 in-the-money vertical BEAR PUT spread at $9.20 or best

Don’t pay more than $9.50 or you’ll be chasing.

If you don’t do options, take a look at the ProShares Ultra Short S&P 500 ETF (SDS).

Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.

This is a bet that the S&P 500 (SPY) will not trade above $315.00 by the June 19 option expiration day in 29 trading days. That is up 27 (SPY) points, or $2,000 Dow Average points from here.

Here are the specific trades you need to execute this position:

Buy 11 June 2020 (SPY) $325 puts at………….………$35.00

Sell short 11 June 2020 (SPY) $315 puts at………….$25.80

Net Cost:………………………….………..………….…..........$9.20

Potential Profit: $10.00 - $9.20 = $0.80

(11 X 100 X $0.80) = $880 or 8.69% in 29 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 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.

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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.

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