As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert - (TLT)
Buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) February, 2014 $108-$111 bear put spread at $2.55 or best
Opening Trade
1-23-2014
expiration date: 2-21-2014
Portfolio weighting: 10%
Number of Contracts = 39 contracts
A six-point rally in a long term Treasury bond bear market is good enough for me. That has been the astounding move since the first trading day of 2014.
This position gives us a breakeven point in the ten year Treasury bond at a 2.68% yield, or below the six month low. It also give us further protection in that the (TLT) has to break the 200 day moving average at $107.22 to the upside for us to lose money, something it never does the first time around. And the short dated February 21 maturity means it only has 20 trading days to accomplish this.
If you can?t do the options you can but the ProShares Ultra Short 20+ ETF (TBT) at $72.00, which gives you a 200% short exposure to the Treasury bond market. This happens to be sitting at major six-month support.
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.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months further out.
Here are the specific trades you need to execute this position:
Buy 39 February, 2014 (TLT) $111 puts at?????..?$4.65
Sell short 39 January, 2014 (TLT) $108 puts at????$2.10
Net Cost:????????????....??..??.......$2.55
Potential Profit: $3.00 - $2.55 = $0.45
($0.45 X 100 X 39) = $1,755 or 1.76% for the notional $100,000 model portfolio.
