Trade Alert - (TLT) December 12, 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-$131 in-the-money vertical BEAR PUT spread at $1.99 or best
Closing Trade-NOT FOR NEW SUBSCRIBERS
12-12-2017
expiration date: December 15, 2017
Portfolio weighting: 10%
Number of Contracts = 62 contracts
I am going to take the win here on my short position in the US Treasury bond market (TLT). As a result, you earned a monster 24.38% profit in seven trading days.
Everything unfolded as planned with this trade. The tax bill moved forward, the US economy heated up, US interest rates rose, and bonds fell.
There are only two trading days left until expiration, and with 97.50% of the maximum potential profit in hand, the risk/reward of continuing is no long favorable.
So I am taking profits in my position in the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December, 2017 $129-$131 in-the-money vertical BEAR PUT spread at $1.99 or best
Always leave the last penny for the next guy.
They the money is always made on the "BUY" and that was certainly true is this case.
We entered this position on the day the market went crazy on the news on the arrest of former National Security Advisor Michael Flynn.
At one point, the Dow Average was down 350 points, and bonds soared three full points.
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.
To lose money on this position the (TLT) would have to have risen above $129 by the December 15 options expirations, and yields would have to drop below 2.23%, which they absolutely wouldn't ahead of a new deluge of bond selling from the Fed.
If you scaled into a long in the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall, keep it. It has much further to rise.
Well done and on to the next trade!
Here are the specific trades you need to execute this position:
SELL 62 December, 2017 (TLT) $131 puts at.........................................$4.85
Buy to cover short 62 December, 2017 (TLT) $129 puts at...............................$2.86
Net Proceeds:...............................................................................................$1.99
Profit: $1.99 - $1.60 = $0.439
(62 X 100 X $0.39) = $2,418 or 24.38% in 7 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.
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