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) April 2023 $96-$99 in-the-money vertical Bull Call debit spread at $2.98 or best
Closing Trade
4-12-2023
expiration date: April 21, 2023
Portfolio weighting: 10%
Number of Contracts = 40 contracts
We have pretty much squeezed all the juice out of this lemon. I need to take profits here to make room for a new bond position. As I am currently 100% invested, I need to take profits on existing position before I can establish a new one.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) April 2023 $96-$99 in-the-money vertical Bull Call debit spread at $2.98 or best.
As a result, you get to take home $1,520, or 14.61% in 7 trading days. Well done and on to the next trade.
If you can’t get a price you like, just hold on to the April 21 option expiration in seven trading days.
I am looking for the Fed not to raise interest rates again for the rest of this decade after they raise interest rates by 0.25% at the May 2 meeting. After that, rates will flatline for three months. By June, economic weakness will be so obvious that a dramatic rate-cutting policy will ensue.
And this won’t be just any old easy money policy. I expect a 0.75% rate CUT at the July 26 meeting and for the Fed to continue cutting at a 0.75% rate at every meeting until the economy stabilizes.
In addition, the Fed will end its quantitative tightening program by June, which is currently sucking $90 billion a month out of the economy. That’s a lot of bond selling that suddenly ends. Bonds will soar.
I’m looking for $120 in the (TLT) sometime in 2023, with a possible stretch to $130. Use every five-point dip to load up on shares in the ETF, calls, call spreads, and one-year LEAPS. This trade is going to work fast. It is the low-hanging fruit of 2023.
Kaching!
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 months. 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) will not fall below $99.00 by the April 21 option expiration in 14 trading days.
Here is the specific accounting you need to close out this position:
Sell 40 April 2023 (TLT) $96 calls at…………............………$10.50
Buy to cover short 40 April 2023 (TLT) $99 calls at…………$7.52
Net Proceeds:………………………….…….......…..………….….....$2.98
Profit: $2.98 - $2.60 = $0.38
(40 X 100 X $0.38) = $1,520, or 14.61% in 7 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.
