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) April 2023 $113-$116 in-the-money vertical Bear Put debit spread at $2.60 or best
Opening Trade
3-20-2023
expiration date: April 21, 2023
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Fears over the possible collapse of Credit Suisse Bank in Switzerland created a monster $4 rally in the (TLT), taking ten-year US Treasury bond yields to a subterranean 3.40%.
I don’t believe that bonds can maintain a sustainable rally until the debt ceiling dispute is resolved in Washington. As long as the bomb throwers are in charge in the House, this isn’t going to happen.
A war over the budget has just been unleashed, with each party presenting totally different visions of an American future. This has further made bond-buyers skittish, giving us a great entry point.
As a result, ten-year US Treasury yields have crashed from 4.40% to 3.40%, bringing the prospects of an economic recovery to a juddering halt.
The charts are showing a textbook double bottom in yields and a lower low usually follows. The (TLT) has rocketed by an incredible $8 in only a week.
Buying bonds now is like lending money to someone even after they told you they won’t repay.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) April 2023 $113-$116 in-the-money vertical Bear Put debit spread at $2.60 or best.
Don’t pay more than $2.70 or you’ll be chasing on a risk/reward basis.
I am looking for the Fed to raise interest rates by 0.25% at the March 22 meeting. After that, rates will flatline for three months. By June, economic weakness will be so obvious that a dramatic rate-cutting policy will ensue.
And this won’t be just any old easy money policy. I expect a 0.75% rate CUT at the July 26 meeting and for the Fed to continue cutting at a 0.75% rate at every meeting until the economy stabilizes.
In addition, the Fed will end its quantitative tightening program by June, which is currently sucking $90 billion a month out of the economy. That’s a lot of bond selling that suddenly ends. Bonds will soar.
I’m looking for $120 in the (TLT) sometime in 2023, with a possible stretch to $130. Use every five-point dip to load up on shares in the ETF, calls, call spreads, and one-year LEAPS. This trade is going to work fast. It is the low hanging fruit of 2023.
Kaching!
The only way to lose money on this position is if the US economy goes into a deep recession very quickly. As we are on the verge of a possible mild recession at worst, I highly doubt this is going to happen. And this has to happen in only 19 trading days.
This is a bet that the (TLT) will not rise above $113.00 by the April 21 option expiration in 19 trading days.
Here are the specific trades you need to execute this position:
Buy 40 April 2023 (TLT) $116 puts at………….………$10.00
Sell short 40 April 2023 (TLT) $113 puts at……..……$7.40
Net Cost:………………………….………..………….....….....$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600, or 16.00% in 19 trading days.
It’s now the Opening Act for the Bond Market
If you are uncertain about 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.
