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.
Trade Alert – (SPY)- BUY
Buy the S&P 500 SPDR?s (SPY) November, 2015 $213-$216 in-the-money vertical bear put spread at $2.45 or best
expiration date: November 20, 2015
Portfolio weighting: 10%
Number of Contracts = 41 contracts
You can pay all the way up to $2.65 for this spread and it still makes sense. If you can?t do options buy the (SDS) for short term trade.
It is a bet that the (SPY) does not trade above $213 in the next 15 trading days.
After the Fed?s non-decision yesterday, and the prospect of a real rate rise in December, the market is setting up for a mini correction in November and a rise in the Volatility Index (VIX).
The market has just enjoyed a short covering rally for the ages, the best in four years. It is waaaaay overbought.
Looking at the other leading indicators of risk taking for the financial markets, oil (USO) and junk bonds (HYG), they are pointing towards an imminent arrival of a ?RISK OFF? trade.
Still, being up 37% in 2015 while virtually every other hedge fund on the planet either unchanged, or showing major losses, (Brazil? You had to be joking!) I am going to be cautious, wary, and circumspect. That means staying small, deep in the money, with a short dated expiration.
I also means keeping a close eye on the exit and a stop losses if the market suddenly starts to go against me.
A new all time high for stocks in November? Really?
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 on how to execute an options spread, please watch my training video on ?How to Execute a Bull Call Spread? by clicking here at https://www.madhedgefundtrader.com/ltt-executetradealerts/ . You must me logged into your account to view the video.
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.
Here are the specific trades you need to execute this position:
Buy 41 November, 2015 (SPY) $216 puts at????.?.??$5.15
Sell short 41 November, 2015 (SPY) $213 puts at????..?$2.70
Potential Profit at expiration: $3.00 – $2.45 = $0.55
(41 X 100 X $0.55) = $2,245 or 2.25% profit for the notional $100,000 portfolio