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) December 2019 $128-$131 in-the-money vertical BULL CALL spread at $2.60 or best
Opening Trade
11-12-2019
expiration date: December 30, 2019
Portfolio weighting: 10%
Number of Contracts = 38 contracts
With the Mad Hedge Market Timing Index wildly overbought at 89, I believe we are about to see a new surge in bond prices. Overbought begets stock selling which in turn creates bond buying.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December 2019 $128-$131 in-the-money vertical BULL CALL spread at $2.60 or best.
Don’t pay more than $2.75 or you’ll be chasing.
If you don’t do options, buy the ProShares Ultra Short 20 Year Plus Treasury Bond ETF (TBT) outright for a quick pop.
This is a bet that the (TLT) will not fall below $131.00 by the December 20 option expiration in 28 trading days. To lose money on this position, ten-year US Treasury yields would have to rise above 2.15%. That is a bet I am willing to make on top of a 12-point dip.
These strikes have the additional benefit in that the (TLT) has major support at the 200-day moving average at $130.64.
The fundamental reasons for this trade are quite simple. Quantitative easing is ramping up again on a global basis, including the US. Most of that money ends up in US stocks and bonds. More money creating creates more buying of everything. It’s really that simple.
The US now has among the world’s highest interest rates. They are about to join the ranks of the world’s lowest.
Some 35% of the world’s outstanding government debt now has negative interest rates. In Germany, the figure is an eye-popping 88%. That is hugely bullish for bond prices everywhere.
Here are the specific trades you need to execute this position:
Buy 38 December 2019 (TLT) $128 calls at………….………$7.80
Sell short 38 December 2019 (TLT) $131 calls at…..………$5.20
Net Cost:………………………............….………..………….….....$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(38 X 100 X $0.40) = $1,520 or 15.38% in 28 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.
