Trade Alert - (TLT) August 18, 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) - BUY
BUY the iShares Barclays 20+ Year Treasury Bond Fund (TLT)September, 2017 $129-$132 in-the-money vertical BEAR PUT spread at $2.60 or best
Opening Trade
8-18-2017
expiration date: September 15, 2017
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I am going to use the yet another gap up in bond prices today to go back into a short position in the bond market.
The ratchet up was triggered by the rumored resignation of presidential Economic Advisor and former Goldman Sachs CEO, Gary Cohen.
Thank you Mr. President.
You can also blame the weak inflation data yesterday, which suggests that interest rates will stay low for longer.
With bonds now at a 2.20% yield, a mere 7 basis points above the 2017 low, I am willing to bet that they won't go much lower, at least within the next 19 trading days to the September 15 options expiration.
Remember also that the Fed is raising interest rates again by 25 basis points on September 16.
So I am going to pick some low hanging fruit here and buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) September, 2017 $129-$132 in-the-money vertical BEAR PUT spread at $2.60 or best.
To lose money on this position yields would have to drop below 2.05%, which they absolutely won't ahead of another Federal Reserve interest rate hike in September.
Please note that this position expires five days before the end of that meeting and the rate decision is announced.
Don't pay more than $2.70 for this position or you'll be chasing.
If you don't do options, this would be a great level to scale into a long in the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall.
To see how to enter this trade in your online platform, please look at the order ticket below from Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video on How to Execute a Vertical Bear Put Spread by clicking here at
http://members.
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.
Here are the specific trades you need to execute this position:
Buy 38 September, 2017 (TLT) $132 puts at.............................................................$5.90
Sell short 38 September, 2017 (TLT) $129 puts at....................................................$3.30
Net Cost:......................................................................................................................
Potential Profit: $3.00 - $2.60 = $0.40
(38 X 100 X $0.40) = $1,520 or 15.38% in 19 trading days
