Trade Alert - (UNP) September 5, 2017
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 - (UNP) - BUY
BUY the Union Pacific (UNP) September, 2017 $100-$102 in-the-money vertical BULL CALL spread at $1.75 or best
Opening Trade
9-5-2017
expiration date: September 15, 2017
Portfolio weighting: 10%
Number of Contracts = 57 contracts
Don't pay more than $1.85 for this spread or you'll be guilty of chasing.
By the way, this is also a bet that the stock market does NOT see more than a 5% correction in the next 8 trading days.
When copper and Freeport McMoRan (FCX) run up, there is one thing I always do automatically, reflexively, and without thinking about it.
I buy railroads.
This is because a revival of Chinese infrastructure building is driving the recent meteoric rise in the red metals.
The US is one of the largest producers of copper, fourth in the world after Chile, Peru, China, with 1,520 metric tonnes in annual output.
So how does the metal get to the Middle Kingdom?
It rides the Union Pacific Railroad (UNP).
This is a bet that (UNP) will NOT fall below $102 over the next 8 trading days by the September 15 expiration date.
If you can't play options, buy the stock outright. It is ready for a nice run, as stock buyers move out of FANG and into old-line industrials and transports, like the railroads.
Another angle here is that as the president ramps up trade wars with Mexico and Canada and threatens the demise of NAFTA, you want to avoid railroads with North/South routes, like Kansas City Southern (KSU).
(UNP) has predominantly East/West routes, and will benefit the most from increasing trade with China.
China will finance half of any US government debt going forward to finance the president's substantial spending plans, so there isn't going to be a trade war here.
If you want to reduce your risk, buy the IShares Transportation Average ETF (IYT). The two largest holding here are (UNP) and Kansas City Southern (KSU).
Baskets of shares always have lower volatility than single stocks, but lower returns as well.
Note that I have been clever here by picking an upper $102 strike. That is right where we get enormous technical support from a double bottom on the charts that stretches back to March.
If we break that, I will stop out of this position so fast it will make your head spin, given these uncertain times.
Buy the railroads. At least if you are early, you still have a functioning, cash flow positive business.
Railroads all look like ripe "buy on dips" low hanging fruit to me.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off od Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute a Vertical Bull Call Spread
http://members.
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.
If it doesn't get done, then bump up your bid for the spread by a few cents.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. You are trying to buy your own yacht with this trade, not your broker's.
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.
Here are the specific trades you need to execute this position:
Buy 57 September, 2017 (UNP) $100 calls at...........................$4.70
Sell short 57 September, 2017 (UNP) $102 calls at......................$2.95
Net Cost:...................................................................................
Potential Profit: $2.00 - $1.75 = $0.25
(57 X 100 X $0.25) = $1,425 or 14.28% in 8 trading days.
