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) – EXPIRATION
EXPIRATION OF the iShares Barclays 20+ Year Treasury Bond Fund (TLT) September 2020 $170.00-$172.50 in-the-money vertical Bear Put spread at $2.50
Closing Trade - NOT FOR NEW SUBSCRIBERS
NOTE: NEW SUBSCRIBERS WILL RECEIVE A BATCH OF NEW TRADE ALERTS ONCE WE SEE A FAVORABLE ENTRY POINT IN THE MARKET.
9-18-2020
expiration date: September 18, 2020
Portfolio weighting: 10%
Number of Contracts = 45 contracts
The bond market is nicely selling off today, virtually assuring that our sport position in the iShares Barclays 20+ Year Treasury Bond Fund (TLT) September 2020 $170.00-$172.50 in-the-money vertical Bear Put spread will expire at its maximum profit point.
Assuming that the market does not rally more than $6.39 over the next few hours, a highly unlikely possibility, you will get to take home $1,350, or 13.63% in 9 trading days. Well done, and on to the next trade.
You don’t have to do anything with this expiration.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning September 21and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
If you bought the ProShares Ultra Short Treasury Bond Fund (TBT) outright keep it. We are going much higher.
This cycle of COVID-19 infections is imminently going to peak out and start declining, at least for the short term.
As a result, I believe the core long FANG trade is long overdue for a break. Instead, I think we are about to witness a major rotation into domestic economic “recovery” stocks. Stocks will keep going up, but the leadership will change. Bonds and gold are also due for profit-taking.
The bond market has just seen one of the sharpest rallies in history, the United States US Treasury bond fund (TLT) plunging an eye-popping 245 basis points in four months. That took ten-year yields from 0.95% to 0.52%. Those who got rate locks on their refi’s last week, well done.
The fundamentals of this trade are very simple. With the national debt already rising from a record $23 trillion to an eye-popping $30 trillion by the end of 2020, the US Treasury demands on the bond market are going to be incredible.
It is almost mathematically impossible for bond prices to rise from here. They can only go sideways at best, or down big in the worst case. Sounds like a great short to me.
This was a bet that the (TLT) would not rise above $170.00 by the September 18 option expiration in 9 trading days. To lose money on this position, ten-year US Treasury yields would have to approach 0.35%.
Here are the specific numbers you need to close out this position:
EXPIRATION of 45 September 2020 (TLT) $172.50 puts at………….………$8.89
EXPIRATION of short 45 September 2020 (TLT) $175.00 puts at…………$6.39
Net Proceeds:……….............………………….………..………………………..….....$2.50
Profit: $2.50 - $2.20 = $0.30
(45 X 100 X $0.30) = $1,350, or 13.63% in 9 trading days.
