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) – STOP LOSS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT)October 2018 $114-$117 in-the-money vertical BULL CALL spread at $2.10 or best
Closing Trade
9-19-2018
expiration date: October 19, 2018
Portfolio weighting: 10%
Number of Contracts = 38 contracts
Massive Chinese dumping of US Treasury bonds in the wake of the last trade war escalation on Monday has absolutely crushed the market.
At this morning’s opening my strict 2% of capital stop loss limit has been triggered.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2018 $114-$117 vertical BULL CALL spread at $2.10 or best.
If the Chinese keep selling, and they have a further 1.17 trillion in US Treasury bond holdings, there is a further point in downside risk in this position.
That is more risk than I am willing to take.
You play this game long enough and you occasionally take a hit like this. The goal is to keep it a small hit that you can rapidly bounce back from rather than a big one that puts you out of business. We will make the money back on this in the next trade.
If you bought the (TLT) outright sell it.
Here are the specific trades you need to liquidate this position:
Sell 38 October, 2018 (TLT) $114 calls at………….………$3.10
Buy to cover short 38 October, 2018 (TLT) $117 calls at….$1.00
Net Proceeds:………………….…………..………….….
Loss: $2.55 -$2.10 = -$0.45
(38 X 100 X -$0.45) = -$1,710 or -17.10%.
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.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute Vertical Call and Put Debit Spreads by clicking here.
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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 done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.