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) - BUY
BUY the iShares Barclays 20+ Year Treasury Bond Fund (TLT)December, 2017 $129-$131 in-the-money vertical BEAR PUT spread at $1.60 or best
Opening Trade
12-1-2017
expiration date: December 15, 2017
Portfolio weighting: 10%
Number of Contracts = 62 contracts
The markets are going crazy on the news on the arrest of former National Security Advisor Michael Flynn, and the prospect that he will testify to the president's direct contacts with the Russians during the election.
At one point, the Dow Average was down $350 points, and bonds soared three full points.
I am using the spike to buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December, 2017 $129-$131 in-the-money vertical BEAR PUT spread at $1.60 or best.
The options market has gone wild just now, and prices are all over the map/ The $1.60 price is really a best guess at where you might get something done.
With my Market Timing Index at 57, and risk assets enormously extended, I am not inclined to bet the ranch here.
The fundamental reasons for this trade, which has been writing me a check almost every month this year, are still there.
1) The Global Synchronized Recovery is accelerating.
2) The Fed will start dropping on the bond market in the very near future $6 billion a month, or $200 million a day, worth of paper in its QE unwind.
3) It is widely perceived that potential tax cuts will provide further stimulus for the US economy.
All are HUGELY bond negative.
That should take bonds down to new 2017 lows. What we could be seeing here is the setting up for the perfect head and shoulders top of the (TLT) for 2017.
To lose money on this position the (TLT) would have to rise above $129, and yields would have to drop below 2.23%, which they absolutely won't ahead of a new deluge of bond selling from the Fed.
Don't pay more than $1.75 for this position or you'll be chasing.
If you don't do options, this would be a great level to scale into a long in the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall.
Here are the specific trades you need to execute this position:
Buy 62 December, 2017 (TLT) $131 puts at...........................................$4.60
Sell short 62 December, 2017 (TLT) $129 puts at.................................$3.00
Net Cost:.............................................................................................
Potential Profit: $2.00 - $1.60 = $0.40
(62 X 100 X $0.40) = $2,480 or 25% in 10 trading days.
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.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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.
