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 2024 $103-$106 in-the-money vertical Bear Put debit spread at $2.98 or best
Closing Trade
10-4-2024
expiration date: October 18, 2024
Portfolio weighting: 10%
Number of Contracts = 40 contracts
My bet that bonds became wildly overpriced in the wake of the 50 basis point interest rate cut proved correct. We now have 95% of the maximum potential profit in hand. The risk/reward of continuing ten trading days until the October 18 expiration is no longer favorable.
It is clear that the bond market had already fully priced in half of the 250 basis points worth of interest rate cuts now discounted the June Fed futures markets. We have just witnessed a massive $20 rally of the (TLT) bottom. Upside surprises in prices from here should be nil.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2024 $103-$106 in-the-money vertical Bear Put debit spread at $2.98 or best.
As a result, you get to take home $1,520, or 15.38% in 11 trading days.
Well done and on to the next trade.
Don’t enter market orders to buy on pain of death. Simply enter an order at my $2.98 limit and then keep nudging it down one penny at a time until you get filled.
This was bet that the (TLT) would not rise above $103.00 by the October 18 option expiration in 12 trading days.
Here are the specific trades you need to enter out this position:
Sell 40 October 2024 (TLT) $106 puts at…………..............………$10.00
Buy to cover short 40 October 2024 (TLT) $103 puts at………..…$7.02
Net Proceeds:………………………….………..………….….....................$2.98
Profit: $2.98 - $2.60 = $0.38
(40 X 100 X $0.38) = $1,520, or 15.38% in 11 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.
