Trade Alert - (TLT) April 23, 2019 - BUY
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) May 2019 $116-$119 in-the-money vertical BULL CALL spread at $2.60 or up to $2.75
Opening Trade
4-23-2019
expiration date: May 17, 2019
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I believe that the battle between the president and the Fed will result in no substantial change in interest rates for the rest of 2019. Yes, the Fed has caved.
The president wants to superheat the economy on credit to game the 2020 elections. Cooler heads are prevailing at the Fed, which is focusing on the moderate 2% average growth the economy has enjoyed over the last decade. With Weekly Jobless Claims hitting a 49-year low at 196,000 last week, the threat of inflation, and therefore rate rises, could be imminent.
So, I am buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) May 2019 $116-$119 in-the-money vertical BULL CALL spread at $2.60 or best.
Don’t pay more than $2.75, or the risk/reward is no good.
If you don’t trade options, I would buy a small amount of (TLT) for a trade. This can also act as a hedge against any long stock positions you may have. If stocks fall, bonds will rise.
This is a bet that the (TLT) would not fall below $119.00 by the May 17 expiration day in 19 trading days. That would require ten-year US Treasury bonds to rise above 2.83% versus the current 2.59%. That is highly unlikely, given that the Fed has indicated it won’t raise interest rates for the rest of 2019.
Here are the specific trades you need to execute this position:
Buy 38 May 2019 (TLT) $116 calls at………….………$7.00
Sell short 38 May 2019 (TLT) $119 calls at………….$4.40
Net Cost:………………........………….…………..….….....$2.60
Potential Profit: $3.00 - $2.60 = $0.40
(38 X 100 X $0.40) = $1,520 or 15.38% in 19 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.