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.
SELL the IPath S&P 500 VIX Short Term Futures ETN (VXX) January 18 2019 $20 puts at $0.02 or best
Closing Trade
12-3-2018
expiration date: January 18, 2019
Portfolio weighting: 5%
Number of Contracts = 125 contracts
I hate it when my underlying assumptions prove to be correct but the security I pick absolutely fails to perform.
On October 8, the Volatility Index (VIX) was peaking at $30, so I happily bet that it would go down. And so it did, plunging all the way down to this morning’s $16.27.
The (VXX) was supposed to rocket in this situation. Instead, it crashed from 20 cents all the way down to two cents.
The problem is that it took too long for this to happen, two months instead of weeks, so our entire profit was eaten up by option time decay. Also, a lot of institutions bought the (VXX) for downside protection and then never sold as they were so worried about market prospects in the face of raising interest rates and a trade way with China. That lead to far high market volatility and far lower (VXX) prices that models would normally predict.
This was a bet that something good happens sometime in three months and the IPath S&P 500 VIX Short Term Futures ETN (VXX) doubles or triples.
It was also a bet that this will happen soon, before time decay eats up the value of our position.
This was a high-risk unhedged trade, so I fortunately went in with only a 5% position.
To see how to exit this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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.
Here are the specific trades you need to exit this position:
Sell 125 January 18 2019 (VXX) $20.00 puts at……………..…$0.02
Net Proceeds:…………($0.02 X 100 shares per option X 125) = $250
Loss: $5,000 - $250 = $4,750
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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
You must be logged into your account to view the video.
Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
