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, 2018 $1118-$121 in-the-money vertical BEAR PUT spread at $2.70 or best
Opening Trade
10-2-2018
expiration date: October 19, 2018
Portfolio weighting: 10%
Number of Contracts = 37 contracts
The bond market really looks like it is close to breaking out of a two year range to the downside. So, I am going to be aggressive here and sell short bonds once again.
Specifically, I am going to buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October, 2018 $118-$121 in-the-money vertical BEAR PUT spread at $2.70 or best.
Don’t pay more than $2.80 or you’ll be chasing.
This is a bet that the (TLT) will not rise above the $118 strike price by the October 19 expiration date in 13 trading days.
With the stock markets on a tear, there are few other attractive trades out there. At least with this one we have the certainly that treasury bonds will be yielding 4% in a year.
The fundamental reasons for this trade are growing by the day.
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 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:
Buy 37 October, 2018 (TLT) $121 puts at………….………$4.40
Sell short 37 October, 2018 (TLT) $118 puts at………….$1.70
Net Cost:………………………….………..………….…...
Potential Profit: $3.00 - $2.70 = $0.30
(37 X 100 X $0.30) = $1,110 or 11.11% in 13 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.