Urgent Video Trade Alert #4

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Today’s trade alert is JPM (JP Morgan Chase) and we are selling premium with a Dec 36/33 Bull Put.  The Short Put at strike 36 generates the premium and the Long Put at strike 33 the hedges the short put position.  The credit we receive on the spread is $0.21 against the risk of $2.79 which gives us a 7.5% ROI in 37 days (73% annualized return!)  Out Target Exit Point is to allow both of the options expire worthless upon December’s expiration.  We can make money if the stock goes up, languishes or even trends lower by up to 10%.

If the stock trends lower by more than 10% and triggers assignment at the Short Put strike at 36, our Contingency Exit Plan is to take assignment of the stock and trade it as a Collar until profitable.  This trade allows a lot of alternatives to be successful and the comfort is knowing that if you end up owning the stock, you are owning it at a discount and can trade it until profitable.  From a probability perspective, the trade has an 85% chance of working and we can win in multiple trends!  Simply put, we just sit back and collect time premium day after day.

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4 thoughts on “Urgent Video Trade Alert #4

  1. De

    Right now I get a credit of .15 shown vs. .21 in your trade, sell a 36/33 vertical. If I sell the 37/34 vertical I get a .23 credit. The market is not open yet. See where it goes.

  2. Trading Coach

    Hi De, The natural on the spread right now is still .18 which is 6.3% roi on risk capital with a great margin of safety as the Short Put is 10% below the market. JPM is still trading in a tight Flag and will more than likely escalate. However, you need to do your own due diligence and remain within your risk tolerance.

  3. blackgold

    I like this trade given the nice support JPM has shown around the $36 area. BUT for .21 cents credit one must be willing to trade more contracts to make that credit worthwhile. While your contingency plan is to take assignment of stock if the trade goes against you a larger amount of money is required. In other words i would like to collect more premium myself. Alternatively you could close out half or some portion if the trade went in the money. Just my thoughts.

  4. Neil

    You show a trade for Dec. options but the date on the chart you show is the 23rd of December.It’s to late to do a Dec. option on the 23rd. When did you give the signal to do the trade and why show it after expiration?

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