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, 2018 $123-$126 in-the-money vertical BEAR PUT spread at $2.50 or best
Opening Trade
3-7-2018
expiration date: April 20, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I am using the three and a half point dead cat bounce off the bottom of the US Treasury bond market (TLT) triggered by the imminent prospect of a new trade war.
Specifically, I am buying iShares Barclays 20+ Year Treasury Bond Fund (TLT) April, 2018 $123-$126 in-the-money vertical BEAR PUT spread at $2.50 or best.
I'll be honest, I'm not really sure where this spread is exactly trading. Dealing spreads are exceptionally wide today, thanks to the unprecedented chaos in Washington.
So, just put a bid in the middle market and if nothing gets done keep raising it by ten cents until you are. That is the only way to buy a position in these illiquid markets.
This is a bet that the (TLT) will not rise above $123 by the April 20 options expiration days in 32 trading days.
For this to happen, the ten-year Treasury bond yield would have to drop below 2.60%. With the stock market crash now behind us there is no way this is going to happen.
With the Mad Hedge market Timing Index flashing an "extreme buy" at 26, to is time for "RISK ON."
The fundamental reasons for this trade are growing by the day.
1) The Global Synchronized Recovery is accelerating.
2) The Fed will start dropping on the bond market in the very near future $6 billion a month, or $200 million a day, worth of paper in its QE unwind.
3) It is widely perceived that tax cuts will provide further stimulus for the US economy.
4) With the foreign exchange markets no laser focused on America's exploding deficits, a weak US dollar has triggered a capital flight out of the US.
5) We also now have evidence that China has started to dump it's massive $1 trillion in US Treasury bond holdings.
All are HUGELY bond negative.
That should take bonds down to new 2018 lows. What we could be seeing here is the setting up for the perfect head and shoulders top of the (TLT) for 2018.
Don't pay more than $2.70 for this position or you???ll be chasing.
If you don't do options, this would be a great level to scale into a long in the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall.
Here are the specific trades you need to execute this position:
Buy 38 April, 2018 (TLT) $126 puts at..................................................$7.90
Sell short 38 April, 2018 (TLT) $123 puts at.......................................$5.40
Net Cost:...................................................................................................$2.50
Potential Profit: $3.00 - $2.50 = $0.50
(38 X 100 X $0.50) = $1,900 or 20.00% in 32 trading days.
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.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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.
