Trade Alert - (TLT) November 29, 2017
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)December, 2017 $129-$132 in-the-money vertical BEAR PUT spread at $2.95 or best
Closing Trade
11-29-2017
expiration date: December 15, 2017
Portfolio weighting: 10%
Number of Contracts = 39 contracts
I am going to take the win on this one.
German inflation data just came out that showed it was returning faster and bigger than expected.
Fed Governor Janet Yellen then poured fuel on the fire with her semi hawkish comments.
These conspired to cause the bond market to gap down a full point at the opening today.
We really needed only one down day this month to hit a home run with this position, and this is that day.
That's why I'?m selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December, 2017 $129-$132 in-the-money vertical BEAR PUT spread at $2.95 or best.
By coming out here we are reaping 88.88% of the maximum potential profit of this position. The risk/reward of continuing until the December 15 expiration day in 13 trading days is no longer favorable.
With my Market Timing Index high at 69, and risk assets enormously extended, I am not inclined to bet the ranch here.
The fundamental reasons for this trade, which has been writing me a check almost every month this year, are still there.
1) The Global Synchronized Recovery is accelerating.
2) The Fed will start dropping on the bond market in the very near future $6 billion a month, or $200 million a day, worth of paper in its QE unwind.
3) It is widely perceived that potential tax cuts will provide further stimulus for the US economy.
All are HUGELY bond negative.
That should take bonds down to new 2017 lows. What we could be seeing here is the setting up for the perfect head and shoulders top of the (TLT) for 2017.
If you didn't do options and bought the ProShares Ultra Short 20+ Treasury Bond Fund (TBT) instead, a bet that bonds will fall, keep it. We are going much lower.
Here are the specific trades you need to unwind this position:
Sell 39 December, 2017 (TLT) $132 puts at..............................................$6.90
Buy to cover short 39 December, 2017 (TLT) $129 puts at.........................$3.95
Net Cost:...................................................................................................$2.95
Profit: $2.95 - $2.55 = $0.40
(39 X 100 X $0.40) = $1,560 or 15.68% in 18 trading days.
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.
