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 2024 $87-$90 in-the-money vertical Bull Call debit spread at $2.60 or best
Opening Trade
3-4-2024
expiration date: April 19, 2024
Portfolio weighting: 10%
Number of Contracts = 40 contracts
If you don’t trade options, just buy the (TLT) outright. I am looking for a possible 28% gain this year.
After an agonizing two-month reversal in interest rates over the past two months, I believe that rates are in the process of peaking out. You can blame a slowing economy. GDP was revised down, new home sales have slowed, and our largest customers in Europe are in recession.
The tell here is that the US Dollar (UUP) has lost its upside momentum and may also be in the process of peaking out.
We have just been given a nice $9 dip in the (TLT) this morning from its yearend high.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) April 2024 $87-$90 in-the-money vertical Bull Call debit spread at $2.60 or best.
Don’t pay more than $2.75 or you’ll be chasing on a risk/reward basis.
For you to lose money on this trade, 10-year US Treasury bond yields would have to rise from the current 4.23% to 4.45%, which I believe is unlikely given that the first Fed interest rate cuts in years are probably only months away.
After selling short bonds (TLT) from $180 all the way down to $82, I flipped to the long side on October 26. The next day, bonds saw their biggest rally in years, making instant millionaires out of several of my followers.
In a heartbeat, we went from super bear to hyper bull.
We are now entering a long-term declining period for the interest rate cycle. By yearend, economic weakness will be so obvious to the Fed that a dramatic rate-cutting policy will ensue to avoid a recession.
And this won’t be just any old easy money policy. I expect 0.25% rate CUTS for the indefinite future and for the Fed to continue cutting at a 0.25% rate at every meeting until the economy stabilizes.
In addition, the Fed is ending its quantitative tightening program this year, 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 $110 in the (TLT) sometime in 2024 and maybe even $120. Use every 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 2024.
Kaching!
The only way to lose money on this position is if the US economy absolutely catches on fire and sends interest rates soaring in the next months. As we are on the verge of a possible soft landing, I highly doubt this is going to happen.
This is a bet that the (TLT) will not fall below $90.00 by the April 19 option expiration in 34 trading days.
Here are the specific trades you need to execute this position:
Buy 40 April 2024 (TLT) $87 calls at………….………$7.00
Sell short 40 April 2024 (TLT) $90 calls at…………$4.40
Net Cost:………………………….……..…..………….….....$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 16.00% in 34 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.
