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Trade with Wisdom.com’= ;s Monthly Subscription Example

When you subscribe to our monthly e-mail subscription services you will receive a minimum of two trades during the expiration month. The trades will include the strate= gy, the date of entry, and some money management suggestions along with exit strategies (or exit dates).

The following is an example of what you might expect:

Inbound e-mail from Wi= se Trader to your inbox.

Disclaimer:=

The suggested trade is for educational purposes only and should be considered f= or a Paper Money (fictitious) account.

Date: June 26

Strategy: Vertical Call Credit (Bear Call)

Underlying: SPY

Price of SPY: $91.80

The Trade:<= /span>

This trade is a high-probability credit vertical for the month of July.

Order(s):

Sell the July $95 Call for $.67 and Buy the July $96 for $.45<= /p>

Profit/Loss:

Net Credit to account =3D $22 per contract (Max Profit)

Risk =3D $78 per contract (Max Loss, not including commissions)

To calculate risk on vertical spreads, take the difference in the strike prices ($96 - $95 =3D $1 and subtract the credit $.22 =3D $.78)<= /p>

If your account’s stop-loss risk is $800, for example, based on the risk= of this particular trade, you can enter into 10 contracts.

Probability:

Using the.25 delta on the $95 call, this trade offers a 75 percent probability of expiring out of the money. If so, it would yield the maximum profit in the = end.

Return:

The return on risk for this trade is 28 percent, not including commissions. To calculate return on risk for a vertical spread, take the credit and divide = it by the maximum loss ($22/$78 =3D 28%).

Profitability:

Maximum profit for this trade occurs if the SPY closes below $95 on July’s expiration. Maximum loss occurs for this trade if the SPY closes above $96 = on July’s expiration.

Inbound e-mail from Wi= se Trader to your Inbox

Disclaimer:=

The suggested trade is for educational purposes only and should be considered f= or a Paper Money (fictitious) account.

Date: July 10

The June 26 call vertical can be closed out entirely today. <= /p>

The risk is in the Short $95 call, so closing it out will rid your account of t= he obligation to deliver shares at this strike amount.

Order(s):

Buy to close the July $95 call for $.03

Sell to close the July $96 call for $.02 if you can recuperate your commissions.= If not, there is virtually no value to the long position, so if it costs more = to close it out than you can obtain from its per-share value, then you may consider keeping it.

After closing out the vertical completely on July 10 for a debit of $.05, your net profit is $17 per contract.

Final Return:

Not including commissions, the return received on this trade is 21.8 percent. T= rade time was from June 26 to July 10.

Congratulations!<= /o:p>

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