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 $150-$153 in-the-money vertical Bull call spread at $2.90 or best
Closing Trade
5-19-2020
expiration date: June 19, 2020
Portfolio weighting: 10%
Number of Contracts = 40 contracts
I am going to cash in on the $2.5 point rally in the bond market over the last two days and bail on my only long position in the bond market.
There was some free money to be had here as a hedge on the long side against the most aggressive short position in the bond market in the 13-year history of the Mad Hedge Fund Trader.
By coming out here, I get dry powder with which to take advantage of the next dive in bond prices. Besides, hard-earned experience has taught me that when the market hands you a two-day $1,600 gift, you take it.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2020 $150-$153 in-the-money vertical Bull call spread at $2.90 or best. If you can’t get this price, keep dropping your offer by 5 cents at a time until you do.
By coming out here, you get to earn $1,600, or 16.00% in 2 trading days.
This was a bet that the (TLT) would not fall below $153.00 by the June 19 option expiration in 22 trading days. To lose money on this position, ten-year US Treasury yields would have to approach 0.90%, up from the current 0.74% in only 22 trading days.
Here are the specific trades you need to exit this position:
SELL 40 June 2020 (TLT) $150 calls at……..........…….………$15.00
Buy to cover short 40 June 2020 (TLT) $153 calls at…………$12.10
Net Proceeds:………………………….………............………….….....$2.90
Profit: $2.90 - $2.50 = $0.40
(40 X 100 X $0.40) = $1,600 or 16.00% in 2 trading days.
The Fat Lady is Singing for the Bond Market
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 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.
