Trade Alert - (TLT) July 7, 2020 - SELL-TAKE PROFITS

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) July 2020 $151-$154 in-the-money vertical Bull call spread at $2.98 or best

Closing Trade – NOT FOR NEW SUBSCRIBERS

7-7-2020

expiration date: July 17, 2020

Portfolio weighting: 10%

Number of Contracts = 40 contracts

When I added this long position, I was besieged by calls from customers. “Everyone knows bonds are going to crash. You are crazy to buy.” My answer was “yes you are right, but they are going to rise first.” And so they did, some $13.

Since I added this position three weeks ago, bonds have barely moved, moving up slightly. However, with the deep in-the-money structure, I get to take home the maximum profit. Such are the wonders of the vertical bull call spread.

At this point, the risk/reward on continuing with the position is no longer favorable. My late mentor Barton Biggs taught me that you should always leave the last few cents of a trade to the next guy.

I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) July 2020 $151-$154 in-the-money vertical Bull call spread at $2.98 or best. If you can’t get this price simply, wait for the July 17 option expiration in eight trading days and collect the entire $3.00 price.

By coming out here, you get to take home $1,520, or 14.61%, in 17 trading days. Well done and on to the next trade.

If you don’t do options, stand aside. There is no trade for you at this level.

This was a bet that the (TLT) would not fall below $154.00 by the July 17 option expiration in 23 trading days. To lose money on this position ten-year US Treasury yields would have to approach 0.50%, up from the current 0.76% in only 19 trading days.

Here are the specific trades you need to exit this position:

Sell 40 July 2020 (TLT) $151 calls at…............……….………$12.25

Buy to cover short 40 July 2020 (TLT) $154 calls at…………$9.27

Net Proceeds:………………………….………..………….….............$2.98

Profit: $2.98 - $2.60 = $0.38

(40 X 100 X $0.38) = $1,520, or 14.61% in 17 trading days.

 

 

he Fat Lady is Singing for the Bond Market

 

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 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.