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 2024 $94-$97 in-the-money vertical Bear Put debit spread at $2.80 or best
Closing Trade
5-17-2024
expiration date: June 21, 2024
Portfolio weighting: 10%
Number of Contracts = 40 contracts
The trifecta of weak economic data over the last two weeks has definitely tilted the risk/reward for this trade against us. A slowing economy brings lower interest rates and higher bond prices. So I am going to use today’s merciful one-point decline to get out with a small profit.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2024 $94-$97 in-the-money vertical Bear Put debit spread at $2.80 or best.
Don’t enter market orders to buy on pain of death. Simply enter an order at the bid side of the market at $2.55 and keep nudging it up until you get something done.
This is a bet that the (TLT) will not rise above $94.00 by the June 21 option expiration in 27 trading days.
Here are the specific trades you need to close out this position:
Sell 40 June 2024 (TLT) $97 puts at………….…….............…$6.00
Buy to cover short 40 June 2024 (TLT) $94 puts at…………$3.20
Net Proceeds:…………….…….………..………….…....................$2.80
Profit: $2.80 - $2.55 = $0.25
(40 X 100 X $0.25) = $1,000 in 8 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.