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) October 2023 $89-$92 in-the-money vertical Bear Put spread at $2.60 or best
Opening Trade
10-4-2023
expiration date: October 20, 2023
Portfolio weighting: 10%
Number of Contracts = 40 contracts
With a government shutdown now widely expected to take place on November 17, I believe the chance of getting a $3 rally over the next seven trading days is miniscule. I also think we’ll see rising oil prices, inflation, and interest rates.
We have just been given a nice $1 pop in the (TLT) this morning, thanks to a failed Treasury bond auction. This may be the only entry point we get on the short side in the foreseeable future. That's what makes a mere seven-day trade profitable.
Also helping this trade is sky-high bond volatility which is the highest I can remember in many years. That's what makes a mere seven-day trade profitable.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2023 $89-$92 in-the-money vertical Bear Put spread at $2.60 or best.
Don’t pay more than $2.75 or you’ll be chasing on a risk/reward basis.
In a heartbeat, we’ve gone from super bull to hyper bear, at least for the next seven days.
In addition, the Fed is ending its quantitative tightening program this month, which is currently sucking $90 billion a month out of the economy. That’s a lot of bond selling that suddenly ends. The Fed balance sheet just dropped below $8 trillion, down from a $9.3 trillion high.
This is a bet that the (TLT) will not rise above $89.00 by the October 20 options expiration in 12 trading days.
Here are the specific trades you need to execute this position:
Buy 40 October 2023 (TLT) $92 puts at……….….………$6.20
Sell short 40 October 2023 (TLT) $89 puts at…….……$3.60
Net Cost:………………………….………..………….........….....$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600, or 15.38% in 12 trading days.
It’s now the Opening Act for the Bond Market
If you are uncertain about 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.