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)November 2018 $107-$110 in-the-money vertical BULL CALL spread at $2.50 or best
Opening Trade
10-10-2018
expiration date: November 16, 2018
Portfolio weighting: 10%
Number of Contracts = 40 contracts
With the US Treasury bond market down 10 points in a month I think we are approaching the bottom end of a new range, which should be $110-$116 in the (TLT) until the next December 25 basis point rate hike.
We’ll know if this is the right trade to do tomorrow morning at 8:30 AM EST when the September Consumer Price Index is published. If it’s moderate bonds will rocket. If it’s hot, we’re toast.
The potential payoff of this trade is a big one, some 20% over the next few weeks. So, roll the dice and take your chances.
It is therefore worth taking a shot on the long side. I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) November 2018 $107-$110 in-the-money vertical BULL CALL spread at $2.50 or best.
This is a bet that ten year yield will not rise from the current 2.24% to above 2.37% by the November 16 expiration date in 29 days.
If yields rise above that you will have much bigger things to worry about, like the onset of a new recession.
Here are the specific trades you need to execute this position:
Buy 40 November 2018 (TLT) $107 calls at………….………$6.50
Sell short 40 November 2018 (TLT) $110 calls at………….$4.00
Net Cost:………………………….………..………….…...
Potential Profit: $3.00 - $2.50 = $0.50
(40 X 100 X $0.50) = $2,000 or 20.00% 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.
