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) July 2022 $119-$122 in-the-money vertical Bear Put spread at $3.00
Closing Trade
7-15-2022
expiration date: July 15, 2022
Portfolio weighting: 10%
Number of Contracts = 40 contracts
We have yet another home run on the short side in the bond market with the Friday expiration. The (TLT) is now trading an acceptable $2.75 away from our nearest $119 strike price. Time to ring the cash register once again. I guess others didn’t get the memo that we are still in a major bear market for bonds.
Just to be clear, this position does not expire at max profit until the 4:00 PM EST close today. But with five positions expiring at the same time, rolling out the accounting now so you don’t get overwhelmed.
I think it is safe to call this one a win. As a result, you get to take home $1,600 or 16.00% in 17 trading days.
Well done, and on to the next trade.
You don’t have to do anything with this expiration.
Your broker 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, July 18 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
The long-term outlook for fixed income is absolutely awful. The next big rotation in the markets will be for tech and financials to bounce hard off a bottom. This will result from coming major upgrades in economic growth, which analysts and strategists are wildly underestimating.
As soon as everyone gets the parts and labor they want, it is going to be off to the races. Add to that a Fed quantitative tightening on monetary stimulus and interest rates will soar.
With the Fed on an announced path of at least 200 basis points in interest rate rises this year, 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.
It is almost mathematically impossible for bond prices to rise and interest rates to fall 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) would not rise above $119.00 by the July 15 option expiration in 17 trading days.
Here is the specific accounting you need to close out this position:
Expiration of 40 July 2022 (TLT) $122 puts at………….………$5.75
Expiration of short 40 July 2022 (TLT) $119 puts at…….……$2.75
Net Proceeds:………………………….………..…………..........….....$3.00
Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 16.00% in 17 trading days.
The Fat Lady is Singing for the Bond Market
