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 2024 $94-$97 in-the-money vertical Bear Put debit spread at $2.55 or best
Opening Trade
5-7-2024
expiration date: June 21, 2024
Portfolio weighting: 10%
Number of Contracts = 40 contracts
As much as I am a bull on bonds for the long term, for the short term the answer is “Not quite Yet”. While the weak April Nonfarm Payroll Report out last Friday is a welcome development, it is just a scintilla of evidence in the right direction. We have a lot more work to do before the true bull market in bonds unfolds.
The (TLT) has just delivered a healthy four point rally and I suspect we are going to see some overhead resistance from the 200-day moving average.
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 $2.55 or best.
Don’t pay more than $2.75 or you’ll be chasing on a risk/reward basis.
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 execute this position:
Buy 40 June 2024 (TLT) $97 puts at………….………$6.00
Sell short 40 June 2024 (TLT) $94 puts at…….……$3.45
Net Cost:………………………….………..………...….….....$2.55
Potential Profit: $3.00 - $2.55 = $0.45
(40 X 100 X $0.45) = $1,800, or 17.65% in 27 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.
