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 2022 $98-$101 in-the-money vertical Bull Call spread at $2.30 or best
Closing Trade
9-27-2022
expiration date: October 21, 2022
Portfolio weighting: 10%
Number of Contracts = 40 contracts
The worst bond market selloff is underway.
Since early August, the (TLT) has sold off by an incredible $20. My yearend target yield for the ten-year US Treasury bond was 3.50% and I thought maybe we could overshoot to 3.60% or 3.70%. We are now at 4.00%, with perhaps two more 75 basis point rate rises to go.
Since we have major profits to protect, I am stopping out here. At least this loss will be more than covered by our profit in our last (TLT) October 2022 $113-$116 in-the-money vertical Bear put spread.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2022 $98-$101 in-the-money vertical Bull Call spread at $2.30 or best.
This was a bet that the (TLT) would not fall below $101.00 by the October 21 options expiration in 27 trading days.
Here are the specific trades you need to close out this position:
Sell 40 October 2022 (TLT) $98 calls at………….……........…$5.00
Buy to cover short 40 October 2022 (TLT) $101 calls at……$2.70
Net Proceeds:………………………….………..………….........….....$2.30
Loss: $2.55 - $2.30 = $0.25
(40 X 100 X $0.25) = $1,000.
The Fat Lady is Singing 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.
