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) – STOP LOSS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) March 2020 $162-$165 in-the-money vertical bear put spread at $1.40 or best
Closing Trade
3-6-2019
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 40 contracts
In 50 years of trading, I have not seen a move like this.
To get an overnight nine pop in bonds is unprecedented in the history of financial markets. Overnight, the yield on the ten-year US Treasury bond has plummeted from 0.91% to 0.70%. In a mere two months, the yield has plunged from 1.80% to 0.70%.
That leaves me little choice but to stop out of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) March 2020 $162-$165 in-the-money vertical bear put spread at $1.40 or best. It’s difficult to get accurate prices right now, so get what you can.
Our hedge saved our bacon on this trade. While we suffered a large loss on the short $162 puts, much of that was offset by our long in the $165 puts.
This was a bet that the (TLT) would not rise above $162.00 by the March 20 option expiration in 14 trading days. To lose money on this position ten-year US Treasury yields would have to fall below 0.75%.
That is exactly what happened in four trading days.
Here are the specific trades you need to exit this position:
Sell 40 March 2020 (TLT) $165 puts at…………...........………$4.00
Buy to cover short 40 March 2020 (TLT) $162 puts at………$2.60
Net Proceeds:………………………….………..…………..........….....$1.40
Loss: $2.50 - $1.40 = -$1.10
(40 X 100 X -$1.10) = $4,400.
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.
