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) – EXPIRATION AT MAX PROFIT
EXPIRATION of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) January 2021 $164-$167 in-the-money vertical Bear Put spread at $3.00
expiration date: January 15, 2020
Portfolio weighting: 10%
Number of Contracts = 40 contracts
This option call spread does not expire until the end of today, and it is so far in the money it is embarrassing. Since we added this position, United States Treasury Bond Fund has collapsed a gut-churning $9. We have an embarrassment of expiration riches this month!
Longs going up, shorts going down, that’s how you make money in the stock market.
Provided that (TLT) does not rise by more than $5.38 by the end of today, the iShares Barclays 20+ Year Treasury Bond Fund (TLT) January 2021 $164-$167 in-the-money vertical Bear Put spread will expire at $3.00.
That means you get to take home $2,000, or 20% in 15 trading days. Well done, and on to the next trade.
With 2021 expected to be one of the strongest years for economic growth in history, there is no chance you’ll see a major rally in the US Treasury bond market from here.
The fundamentals of this trade are very simple. With the national debt already rising from a record $23 trillion to an eye-popping $28 trillion by the end of 2020, the US Treasury demands on the bond market are going to be incredible.
It is almost mathematically impossible for bond prices to rise substantially from here. They can only go sideways at best, or down big in the worst case. Sounds like a great short to me.
This was a bet that the (TLT) would not rise above $164.00 by the January 15 option expiration in 23 trading days. To lose money on this position, ten-year US Treasury yields would have to approach 0.60%.
Here are the specific trades you need to close out this position:
EXPIRATION of 40 January 2021 (TLT) $167 puts at…………..…$8.38
EXPIRATION of short 40 January 2021 (TLT) $164 puts at……..$5.38
Profit: $3.00 -$2.50 = $0.50
(40 X 100 X $0.50) = $2,000 or 20.00% in 23 trading days.
The Fat Lady is Singing for the Bond Market