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) August 2020 $175-180 in-the-money vertical bear put spread at $4.50 or best
Opening Trade
7-9-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 22 contracts
I am returning to an oldie but a goodie, the trade and strike prices that made us so much money during March-April. Since bonds bottomed last month, they have rallied $13 of the back of the strongest stock market rally of all time.
I think stocks are starting to run out of gas here, and bonds should follow them back down. Ten-year US Treasury bonds are already close to the historic highs we saw in March.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) August 2020 $175-$180 in-the-money vertical bear put spread at $4.50 or best.
Don't pay more than $4.70 or you'll be chasing.
If you don’t do options, stand aside. There is no trade for you at this level.
This is a bet that the (TLT) will not rise above $175.00 by the August 21 option expiration in 30 trading days. To lose money on this position, ten-year US Treasury yields would have to approach 0.50%, up from the current 0.65%. The (TLT) would have to go nine points higher for us to take a hot on this trade.
With the US government crushing the bond market with unprecedented new issuance, that is a bet I am willing to make.
Here are the specific trades you need to execute this position:
Buy 22 August 2020 (TLT) $180 puts at………….………$14.70
Sell short 22 August 2020 (TLT) $175 puts at….………$10.20
Net Cost:………………………….………..………….….............$4.50
Potential Profit: $5.00 - $4.50 = $0.50
(22 X 100 X $0.50) = $1,100, or 11.11% in 17 trading days.
The Fat Lady is Singing for the Bond Market
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 by clicking here.
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 on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
