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) June, 2018 $120-$123 in-the-money vertical BEAR PUT spread at $2.65 or best
Opening Trade
5-23-2018
expiration date: June 15, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I am going to use the two point bounce off the bottom to re-enter the short side in the bond market.
Specifically, I am going to buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June, 2018 $120-$123 in-the-money vertical BEAR PUT spread at $2.65 or best.
This isn't a perfect entry point. I'd much better shorting a 2.90% yield than today's 3.01% yield, off 11 basis points from the recent 3.12% high. But there are few other attractive trades out there. At least with this one we have the certainly that treasury bonds will be yielding 4% in a year.
The fundamental reasons for this trade are growing by the day.
1) Bond auctions are getting increasingly difficult to pull off. It's just a matter of time before we get a failed auction.
2) The Fed has already started dropping on the bond market in $6 billion a month, or $200 million a day, worth of paper in its QE unwind.
3) Tax cuts are providing further stimulus for the US economy.
4) We also now have evidence that China has started to dump it's massive $1 trillion in US Treasury bond holdings, or at least boycotting new auctions.
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 $2.75 for this position or you'll be chasing.
Here are the specific trades you need to execute this position:
Buy 38 June, 2018 (TLT) $123 puts at......................$5.40
Sell short 38 June, 2018 (TLT) $120 puts at.............$2.75
Net Cost:..................................................................$2.65
Potential Profit: $3.00 - $2.65 = $0.35
(38 X 100 X $0.35) = $1,330 or 13.20% in 17 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.
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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.
