Trade Alert - (TLT) April 8, 2025

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 2025 $82-$85 in-the-money vertical Bull Call debit spread at $2.60 or best

Opening Trade

4-8-2025

expiration date: May 16, 2025

Portfolio weighting: 10%

Number of Contracts = 40 contracts

Over the last week, the (TLT) has seen the largest selling in its 23-year history, some $130 billion worth. I believe that this is a one-time-only event due to enormous margin calls by brokers using the spike in the Volatility Index ($VIX) to double margin requirements.

The (TLT) is allowed only 50% collateral value for margin purposes, while Treasury bills get 100%.

There has been a lot of speculation about the Chinese dumping their $760 billion in Treasury bond holdings. I don’t think this is the case. The Chinese aren’t going to do anything to hurt their economic interest. Instead, they will boycott new purchases while letting existing issues mature, as they have done for the last four years. That is how they have whittled their bond hoard from a $1.1 trillion peak to $760 billion.

Europe is another story, where there is a rising sentiment against owning anything American while it is trying to destroy its own economies through tariffs. But they own less than China.

The only way to lose money on this trade is for the US economy to suddenly reverse its current policies and recession track. That would send the (TLT) back to the January (TLT) lows.

I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) May 2025 $82-$85 in-the-money vertical Bull Call debit spread at $2.60 or best.

Don’t pay more than $2.75 or you’ll be chasing on a risk/reward basis.

If you live in a foreign time zone when the US stock market is closed, such as Australia, or don’t want to sit in front of a screen all day, simply enter a spread of Good-Until-Cancelled orders overnight, like $2.60, $2.65, $2.70, and $2.75. You should get done on some or all of these.

This is a bet that the (TLT) will not fall below $85.00 by the May 16 option expiration in 29 trading days.

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

Buy 40 May 2025 (TLT) $82 calls at………….……....$8.00

Sell short 40 May 2025 (TLT) $85 calls at………..…$5.40

Net Cost:………………………….……….….....................$2.60

Potential Profit: $3.00 - $2.60 = $0.60

(40 X 100 X $0.40) = $1,600, or 16.00% in 28 trading days.

It’s now the Opening Act 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.

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