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) – SELL-STOP LOSS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December, 2018 $117-$120 in-the-money vertical BEAR PUT spread at $2.30 or best
Closing Trade
12-4-2018
expiration date: December 21, 2018
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Failure of the G-20 meeting in Buenos Aires to deliver any concrete agreement on the trade war was the last thing markets wanted to hear. It has triggered a massive short covering rally in the bond market over fears that the next thing we import from China will be a recession, tax-free!
The 3 year - 5 year US Treasury spread is now inverted, indicating that long interest rates are now lower than short ones. The 2 year-10-year spread is now at an 11 year low of 13 basis points.
Singlehandedly, Donald Trump is bringing forward the next recession at a very rapid pace. Investors are clearly far more worried about a recession than inflation.
Therefore, I am selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December, 2018 $117-$120 in-the-money vertical BEAR PUT spread at $2.30 or best.
I can’t remember the last time I lost money on the bond market, which we have been selling short for 2 ½ years. But right now, discretion is the better part of valor. Yearend effects can be extreme
Here are the specific trades you need to exit this position:
Sell 40 December, 2018 (TLT) $120 puts at………….………$3.40
Buy to cover short 40 December, 2018 (TLT) $117 puts at……$1.10
Net Proceeds:………………………….………..………….….....$2.30
Loss: $2.50 - $2.30 = -$0.20
(40 X 100 X -$0.20) = -$800.
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.