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) November, 2018 $117-$120 in-the-money vertical BEAR PUT spread at $2.97 or best
Closing Trade-NOT FOR NEW SUBSCRIBERS!
11-2-2018
expiration date: November 16, 2018
Portfolio weighting: 10%
Number of Contracts = 37 contracts
I’ll take the home run here and take profits in my short position in the bond market. Since we strapped this baby on the bond market has cratered by three full points.
I want to free up some cash here in case a surprise Democratic sweep of the House of Representatives AND the Senate on Tuesday triggers another market meltdown.
Therefore, I am selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) November, 2018 $117-$120 in-the-money vertical BEAR PUT spread at $2.97 or best.
The risk/reward of continuing with this position is no longer favorable. I’ll leave it to the newbies to carry it for ten more trading days and through the midterm elections.
The fundamental reasons for this trade are growing by the day so I will re-establish this position on the next three-point rally.
1) Bond auctions are getting increasingly difficult to pull off. It’s just a matter of time before we get a failed auction that completely crashes the bond market.
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, so is the NAFTA renewal.
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.
Here are the specific trades you need to execute this position:
Sell 37 November, 2018 (TLT) $120 puts at………….………$7.80
Buy to cover short 37 November, 2017 (TLT) $117 puts at……$4.83
Net Proceeds:………………………….………..………….….....$2.97
Potential Profit: $2.97 - $2.60 = $0.37
(37 X 100 X $0.37) = $1,369 or 14.23% in 8 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.
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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 it done, don’t worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
