5When 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) – STOP LOSS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) August 2019 $137-$140 in-the-money vertical BEAR PUT spread at $1.82 or best
Opening Trade
8-5-2019
expiration date: August 16, 2019
Portfolio weighting: 10%
Number of Contracts = 37 contracts
It takes a once-a-decade move to lose money on a position like this. That’s exactly what we have this morning in the wake of Chinese retaliation to Trump’s latest escalation in the trade war.
Panic buying of bonds globally is rampant. Bond yields have crashed 30 basis points in three days, a move that normally takes three months to occur. The (TLT) has risen a staggering seven points since Wednesday. If you can’t stand the heat, get out of the kitchen.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) August 2019 $137-$140 in-the-money vertical BEAR PUT spread at $1.82 or best
Fortunately, the profits on our remaining three short positions in stocks more than offset the loss on this position.
This was a bet that the (TLT) will not trade above $137.00 by the August 16 option expiration day in 12 trading days. That was a full two points above current levels. It is also a bet that ten-year US treasury bond yields will not fall below 1.80% by mid-August from today’s 1.92%.
If you don’t do options, stand aside. We are close to the top of a new range and it is too late to go long or short.
You still want to be buying major dips in the bond market, as the bull market should continue well into 2020, thanks to exploding global liquidity.
Since 2008, major central bank balance sheets have exploded from $3 trillion to $16 trillion, and there is nowhere better for this mountain of money to go but the ten-year US Treasury bond. Yields have matched the four-year low at 1.95% and are headed to 1.40% by yearend.
Here are the specific trades you need to execute this position:
SELL 37 August 2019 (TLT) $140 puts at………….…....……….…$2.47
Buy to cover short 37 August 2019 (TLT) $137 puts at…………$0.65
Net Cost:………....................…………………...………….….....$1.82
Loss: $2.70 - $1.82 = $0.88
(37 X 100 X $0.88) = $3,256%.
To see how to enter this trade in your online platform, please look at the order ticket above, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
