Taking Profits On Our SPY Put Spread While Adjusting Our Position Weighting

I’m sorry, but a 16.46% profit in SIX trading days? I am going to take it, and avoid carrying the risk for another full month.

We have already captured 76.54% of the maximum potential profit.

It’s a great time to cut back an overweight double position.

If you have the ProShares Short S&P 500 Short Fund ETF (SH) (click here for the prospectus at http://www.proshares.com/funds/sh.html), or the ProShares Ultra Short S&P 500 Short Fund 2X ETF (SDS) (click here for the prospectus at http://www.proshares.com/funds/sds.html), keep it.

We are going lower.

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 Vertical Bear Put Debit Spread” by clicking here at http://members.madhedgefundtrader.com/ltt-executetradealerts/. You must me 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 with only 9 days to expiration.

Here are the specific trades you need to execute this position:

Sell 24 June, 2016 (SPY) $217 puts at………….….……$14.00

Buy to cover short 24 June, 2016 (SPY) $212 puts at.….$9.19
Net Proceeds:…………………………………………………......$4.81

Profit: $4.81 - $4.19 = $0.69

(24 X 100 X $0.69) = $1,656 or 16.46% profit in 6 trading days.

 

Time for Some Downside Protection