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 – (VXX) – BUY
BUY the iPath S&P 500 VIX Short Term Futures ETN (VXX) January, 2018 $60 calls at $2.57 or best
expiration date: January 19, 2018
Portfolio weighting: 5%
Number of Contracts = 20 contracts
This is a bet that the (VXX) will rise sometime in the next month.
It is also a bet that this will happen quickly before time decay eats up the value of our position.
This is a high-risk unhedged trade so I am going in with only a 5% position.
I am slapping on this position as a hedge, or insurance policy, against our other substantial long positions.
If you are new to the service and have no longs, you probably should skip this trade and just watch it as a learning experience.
Long-term followers already know that we did this trade in August and it proved immensely profitable.
The (VXX) only needs to rise from $40 to $60 for the value of this position to rise 131%, as long as this happens in the next month or so. At one point in August, the (VXX) traded at $56.
Going deep out-of-the-money also minimizes the cash up front we need to pay for this position. Going long dated out to January minimizes the negative, eroding impact of time decay, or theta.
Taking an aggressive “RISK OFF” position with the Mad Hedge Market Timing Index well into “SELL” territory at 85, the high for 2017, is also not a bad idea.
Don’t pay more than $2.75 for this position or this risk/reward will tip against you.
If you can’t do options, then buy the (VXX) outright for a short-term trade.
Today, fire insurance is on sale.
If, by chance, the stock market just keeps going up in a straight line, we’ll take a small hit in the position. But we’ll also make a fortune on our other longs.
As I never tire of telling people, no one ever complains when they buy fire insurance and their house doesn’t burn down.
It is truly a win/win trade.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bull Call Spread by clicking here http://members.madhedgefundtrader.com/ltt-executetradealerts/
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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 trades can be enormous.
If you don’t get done, don’t worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
Here are the specific trades you need to execute this position:
Buy 20 January, 2018 (VXX) $60.00 calls at…………………………..$2.57
Net Cost: (100 X 20 X $2.57) = $5,140.