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) December 2019 $145-$148 in-the-money vertical BEAR PUT spread at $2.95 or best
Closing Trade
12-12-2019
expiration date: December 20, 2019
Portfolio weighting: 10%
Number of Contracts = 38 contracts
We bought this bearish position when the bond market had just rallied a massive four points off the back of Trump’s threat to continue the trade war with China for at least another year.
As I expected, the tariff hike has been postponed, if not completely eliminated, causing bonds to collapse big time. After all, winning elections is far more important that balancing trade.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December 2019 $145-$148 in-the-money vertical BEAR PUT spread at $2.95 or best. By coming out here, you get to earn a welcome $1,330, or 13.46% in 8 trading days.
This was a bet that the (TLT) would not trade above $145 by the December 20 option expiration day in 13 trading days. That was a full five points above then-current levels. It was also a bet that ten-year US treasury bond yields will not fall below 1.50% by mid-December from today’s 1.70%.
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 38 December 2019 (TLT) $148 puts at……….....….………$10.80
Buy to cover short 38 December 2019 (TLT) $145 puts at……$7.85
Net Proceeds:….................……………………….....………….….....$2.95
Profit: $2.95 - $2.60 = $0.35
(38 X 100 X $0.35) = $1,330 or 13.46% in 8 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.
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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.
