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) June 2020 $149-$152 in-the-money vertical Bull call spread at $2.92 or best
Closing Trade
5-12-2020
expiration date: June 19, 2020
Portfolio weighting: 10%
Number of Contracts = 40 contracts
We have just caught a monster three-point rally in the (TLT) in only two trading days.
As much as I despise taking profits in 48 hours, the fact is that we have already captured 84% of the maximum potential profit in this position. The risk/reward of carrying on is no longer favorable with still 27 days to expiration.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2020 $149-$152 in-the-money vertical Bull call spread at $2.92 or best.
By coming out here, you get to realize a huge $1,680 or 16.80% in 2 trading days. Well done, and on to the next trade!
Bond option volatilities are still spectacularly high, offering ample opportunities to make money with vertical bear put spreads.
This was a bet that the (TLT) would not fall below $152.00 by the June 19 option expiration in 28 trading days. To lose money on this position, ten-year US Treasury yields would have to approach 1.00%, up from the current 0.71% in only 28 trading days.
Here are the specific trades you need to exit this position:
SELL 40 June 2020 (TLT) $149 calls at………..........….………$16.00
Buy to cover short 40 June 2020 (TLT) $152 calls at…………$13.08
Net Proceeds:………………..........………….………..………….….....$2.92
Profit: $2.92 - $2.50 = $0.42
(40 X 100 X $0.42) = $1,680 or 16.80% in 2 trading days.
The Fat Lady is Singing for the Bond Market
If you are uncertain on 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.
