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 - (TLT) – TAKE PROFITS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December 2022 $91-$94 in-the-money vertical Bull Call spread at $2.97 or best
Closing Trade
12-1-2022
expiration date: December 16, 2022
Portfolio weighting: 10%
Number of Contracts = 40 contracts
We have caught an absolutely ballistic $13 move up in the (TLT) and it’s time to ring the cash register.
With only three cents left in this trade over 11 trading days and 92.5% of the maximum potential profit in hand, the risk/reward is no longer favorable.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December 2022 $91-$94 in-the-money vertical Bull Call spread at $2.97 or best.
As a result, you get to take home $1,480, or 14.23% in 9 trading days. Well done, and on to the next trade.
The fabulous CPI report in October, taking the inflation rate down from 8.7% to 7.7% in one fell swoop, has completely turned the bond market around.
In a heartbeat, we went from super bear to hyper bull.
The reasons are very simple.
*Ultra-high interest rates will force a mild recession in early 2023.
*Then suddenly, inflation will plummet.
*We know this has already started because the largest element in the inflation calculation is housing costs, which are in free fall.
*The Fed will panic and deliver 2023 the sharpest DECLINE in interest rates in American history.
Kaching!
If you think I’m out of my mind, just look at the top performers of the historic stock market rally last week, many of which were across the fixed income space.
The only way to lose money on this position is if the US economy absolutely catches on fire and sends interest rates soaring in the next month. As we are on the verge of a possible mild recession, I highly doubt this is going to happen.
This was a bet that the (TLT) would not fall below $94.00 by the December 16 option expiration in 20 trading days.
Here are the specific trades you need to exit this position:
Sell 40 December 2022 (TLT) $91 calls at………….........………$13.50
Buy to cover short 40 December 2022 (TLT) $94 calls at……$10.53
Net Proceeds:………………………….………..………............….….....$2.97
Profit: $2.97 - $2.60 = $0.37
(40 X 100 X $0.37) = $1,480, or 14.23% in 9 trading days.
It’s now the Opening Act for the Bond Market
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
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.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
