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) – BUY
BUY the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2022 $110-$113 in-the-money vertical Bear put spread at $2.60 or best
Opening Trade
9-28-2022
expiration date: October 21, 2022
Portfolio weighting: 10%
Number of Contracts = 40 contracts
In 54 years of trading, I don’t think I have EVER flipped from the long side to the short side in one day.
That day has finally come. You can thank a $3.50 rise in the (TLT) in hours, which has taken yields down from 4.0% to 3.70%. To lose money on this trade, the (TLT) would have to rise $6.00 and yields fall to 3.40% in 16 trading days.
The move happened because the Bank of England Moved to Support a Crashing Pound by flipping from a seller to a buyer in the long-dated bond market, thus dropping interest rates sharply. The move is designed to offset the new Truss government’s plan to cut taxes and boost deficit spending. The BOE also indicated that interest rate hikes are coming.
The bond vigilantes are back.
Here is the bad news for bonds: we may get another two 75 basis points at the next Fed meeting on November 1-2.
Selling short the (TLT) last November has been one of the best trades of my career. Since then, the beleaguered ETF has collapsed some $50.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October 2022 $110-$113 in-the-money vertical Bear put spread at $2.60 or best.
Don’t pay more than $2.75 or you’ll be chasing on a risk/reward basis.
This is a bet that the (TLT) will not rise above $110.00 by the October 21 options expiration in 16 trading days.
Here are the specific trades you need to execute this position:
Buy 40 October 2022 (TLT) $113 puts at………….………$10.00
Sell short 40 October 2022 (TLT) $110 puts at……..……$7.40
Net Cost:………………………….………..…………..........….....$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 15.38% in 16 trading days.
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.
