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) – EXPIRATION AT MAX PROFIT
EXPIRATION of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) April 2021 $142-$145 in-the-money vertical Bear Put spread at $3.00
Closing Trade - NOT FOR NEW SUBSCRIBERS, YOUR TURN WILL COME
4-15-2021
expiration date: April 16, 2021
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Since we added this position, shares of the United States Treasury Bond Fund (TLT) have risen a modest $1.50, or 1.1%. That is miles away from the nearest $142.00 strike price for this position. As a result, we now have a very safe cushion to take us into tomorrow’s option expiration on April 16.
Although this position does not expire until the close tomorrow, I think it’s safe to call it a win. Therefore, you will get to take home $1,600 or 16.00% in 14 trading days.
Well done and on to the next trade.
You don’t have to do anything with this expiration.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning April 19 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
Try as it may, the bond market just can’t get any more upside traction than that. Instead, we are getting a sideways “time” correction before the next down leg ensues. The outlook for fixed income is absolutely awful.
The memo is out now. Bonds have already dropped 25 in 2021 and the worst is yet to come. This is becoming a one-way trade. Therefore, I will be selling even small rallies, like the one we just saw.
With 2021 expected to be one of the strongest years for economic growth in history, there is no chance you’ll see a major rally in the US Treasury bond market from here. The only question is how fast it will fall.
The fundamentals of this trade are very simple. The national debt rose from a record $23 trillion to an eye-popping $28 trillion in 2020. In 2021, it is expected to explode to $32 trillion. The US Treasury demands on the bond market are going to be incredible.
It is almost mathematically impossible for bond prices to rise substantially from here. They can only go sideways at best, or down big in the worst case. Sounds like a great short to me.
This was a bet that the (TLT) will not rise above $142.00 by the April 16 option expiration in 18 trading days. To lose money on this position, ten-year US Treasury yields would have to plunge to 1.38% from the current 1.65%, which they didn’t.
Here are the specific trades you need to close out this position:
Expiration of 40 April 2021 (TLT) $145 puts at………….………$6.70
Expiration of short 40 April 2021 (TLT) $142 puts at…………$3.70
Net Proceeds:………………………….………..………..........….….....$3.00
Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 16.00% in 18 trading days.
