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) TAKE PROFITS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) April, 2018 $123-$126 in-the-money vertical BEAR PUT spread at $2.92 or best
Closing Trade
3-9-2018
expiration date: April 20, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
If you don't sell the rips, you can't buy the dips.
Quit trying to swing for the fences for the home run.
Far more games are won with dozens of singles than a couple of home runs.
Also, when you capture 84% of a maximum potential profit in only three trading days, you take it every time.
I am going to use the gap down in bond prices this morning triggered by the blockbuster February Nonfarm Payroll Report to take profits on my bond short.
Specifically, I am selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) April, 2018 $123-$126 in-the-money vertical BEAR PUT spread at $2.92 or best.
By taking profits now I can re-enter the bond market again on the short side on the next rally, no matter how slight. The risk reward of continuing with this position for 30 more trading days for only eight cents is not worth it.
This shows you the value of exiting trades when every else is running around with their hair on fire, On Tuesday morning, The Dow Average opened down 350 points on the Gary Cohen resignation, and bonds managed an impressive 3 point rally from the recent low.
Come out here and you will reap a respectable 16.80% or $1,596 profit in only three trading days.
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.
If you bought the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall, keep it. Bonds are falling much further.
Here are the specific trades you need to exit this position:
Sell 38 April, 2018 (TLT) $126 puts at..............................................$8.30
Buy to cover short 38 April, 2018 (TLT) $123 puts at....................$5.38
Net Proceeds:....................................................................................$2.92
Profit: $2.92 - $2.50 = $0.42
(38 X 100 X $0.42) = $1,596 or 16.80% profit in 3 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.
