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) October 2023 $89-$92 in-the-money vertical Bear Put spread at $2.90 or best
Closing Trade
10-16-2023
expiration date: October 20, 2023
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Although this position looks to expire at maximum profit in four trading days on Friday, I am going to take the money and run right here. That gives us a still healthy 75% of the max profit.
The bond market is seeing volatility more extreme than any time in my 55 years of trading. With a global contagion potentially on our doorstep, taking a profit anywhere sounds like a good idea. My remaining two equity positions in Tesla (TSLA) and NVIDIA (NVDA) are SO far in the money they should remain profitable even if the world ends.
Keeping risk low continues to be the name of the game. Remember that the government shuts down on November 17, depriving America of one-quarter of its GDP. That is not good for risk assets.
We have just been given a nice $1.50 drop in the (TLT) this morning, thanks to heightened concern over the Middle East.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2023 $89-$92 in-the-money vertical Bear Put spread at $2.90 or best.
As a result, you get to take home $1,200, or 11.53% in 8 trading days.
In addition, the Fed is continuing its quantitative tightening program this month, which is currently sucking $90 billion a month out of the economy. The Fed balance sheet just dropped below $8 trillion, down from a $9.3 trillion high. It will take a decade to unwind the rest.
This was a bet that the (TLT) would not rise above $89.00 by the October 20 option expiration in 4 trading days.
Here are the specific trades you need to close out this position:
Sell 40 October 2023 (TLT) $92 puts at………….……….........$5.70
But to cover short 40 October 2023 (TLT) $89 puts at….….$2.80
Net Proceeds:……………..…….………..…….............…….….......$2.90
Profit: $2.90 - $2.60 = $0.30
(40 X 100 X $0.30) = $1,200, or 11.53% in 8 trading days.
If you are uncertain on 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.