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 – (VXX)- BUY
Buy the iPath S&P 500 Short Term Futures ETN (VXX) October, 2016 $27-$30 in-the-money vertical bull call spread at $2.52 or best
Expiration Date: October 21, 2016
Portfolio Weighting: 10%
Number of Contracts = 40 contracts
This is a bet that the iPath S&P 500 Short Term Futures ETN (VXX) won?t trade below the $30 level by the October 21st expiration date in 21 trading days.
You can pay up to $2.65 and the trade still makes sense.
If you can?t do the options trade, then stand aside. Time decay is a big part of this trade.
The Volatility Index (VIX) kissed the $11 handle this morning, which has been a great entry point on the long side for the past year. The (VXX) has just plunged 20.78% in the past 7 days.
Long volatility ahead of THIS election sounds like a really good idea. We only need a slight bump in the polls for Trump to see volatility spike, and the first debate is Monday night.
The nice thing about a spread like this is that it largely mitigates the huge contango working against the (VXX).
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? https://www.madhedgefundtrader.com/ltt-executetradealerts/. You must be 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 40 October, 2016 (VXX) $27 calls at????.?.??$6.60
Sell short 40 October, 2016 (VXX) $30 calls at.????..$4.08
Potential Profit: $3.00 – $2.52 = $0.48
(40 X 100 X $0.48) = $1,920 or 19.05% in 21 trading days