Trade Alert – (TLT) December 12, 2012

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ‘look over’ John Thomas’ shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.

Trade Alert – (TLT)

Sell the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December, 2012 $127-$132 put spread at $4.97 or best

Closing Trade


expiration date: December 21, 2012

Portfolio weighting: 10% = 23 contracts

This was a bet that the iShares Barclays 20+ Year Treasury Bond Fund (TLT) would trade at or below $127 on the December 21 expiration in three weeks, or in 13 trading days.

With today’s Fed announcement, Treasury bonds have cratered, taking the (TLT) with it. We have harvested 95% of the potential profit in this position, so there is no point in continuing to carry the risk and tying up margin.

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. This alert is for the monthly options. Don’t buy the weeklies by accident. The difference between the bid and the offer on these spread trades can be enormous. Don’t buy the legs individually or you will end up losing much of your profit up front. If you don’t get filled, then just wait for the next Trade Alert. There will be many fish in the sea.

The same applies if you don’t understand this trade. Better to watch this strategy unfold on paper in the model portfolio before you try it with real money.

Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months farther out. These are the trades you should execute:

Sell 23 December, 2012 (TLT) $132 puts at…………….……$9.00
Buy to cover short 23 December, 2012 (TLT) $127 puts at….$4.03
Net Proceeds:…………….…………….…….…………..…….$4.97

$4.97 – $4.45 = $0.52

(23 X 100 X $0.52) = $1,196, or 1.20% profit for the notional $100,000 portfolio for a three month position.