Trade Alert - (SPY) October 19, 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) - BUY

BUY the S&P 500 (SPY) November 2020 $370-$375 in-the-money vertical BEAR PUT spread at $4.40 or best

Opening Trade

10-19-2020

expiration date: November 20, 2020

Portfolio weighting: increase from 10% to 20%

Number of Contracts = 24 contracts

Negotiations over a stimulus deal are almost certainly going to fail, so I am doubling up my short position in the S&P 500.

Given that my most aggressive yearend target for the S&P 500 is $370, I think adding the (SPY) November 2020 $370-$375 in-the-money vertical BEAR PUT spread at $4.40 or best is a safe bet.

It also hedges out existing long in Visa (V).

If Biden does win, you can expect a major round of profit-taking in stocks as investors rush to beat any increase in capital gains taxes in 2021.

Yes, I know we are in a liquidity-driven bull market.

Stocks are now more expensive than they were in January and the most expensive since the 2000 Dotcom Bubble top.

It’s right when the market appears unstoppable that it rolls over and dies.

Don’t pay more than $4.60 or you’ll be chasing.

If you don’t do options, take a look at the bearish 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 $370.00 by the November 20 option expiration day in 23 trading days.

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

Buy 24 November 2020 (SPY) $375 puts at……….….………$29.00

Sell short 24 November 2020 (SPY) $370 puts at………….$24.60

Net Cost:………………………….………..………...............….….....$4.40

Potential Profit: $5.00 - $4.40 = $0.60

(24 X 100 X $0.60) = $1,440 or 13.63% in 23 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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