Trade Alert - (TLT) January 29, 2018 SELL TAKE PROFITS
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)February, 2018 $127-$130 in-the-money vertical BEAR PUT spread at $2.95 or best
Closing Trade
1-29-2018
expiration date: February 16, 2018
Portfolio weighting: 10%
Number of Contracts = 39 contracts
I am using the major breakout to the upside in the yield on the 10-year Treasury bonds to 2.70% this morning cover half my shorts in the bond market.
At $2.95 we have captured 87.5% of the maximum potential profit in this position. I would rather have some dry powder with which to double up my short again on even the slightest future bond market rally.
I am therefore selling my position in the iShares Barclays 20+ Year Treasury Bond Fund (TLT) February, 2018 $127-$130 in-the-money vertical BEAR PUT spread at $2.95 or best.
This means that we earned a hefty 13.46% profit in only 12 trading days.
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 2018 lows. What we could be seeing here is the setting up for the perfect head and shoulders top of the (TLT) for 2018.
To lose money on this position the (TLT) would have to rise above $127, and yields would have to drop below 2.36%, which they absolutely won't ahead of a new deluge of bond selling from the Fed.
If you in the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall, keep it. Bonds have much more downside to go.
Here are the specific trades you need to exit this position:
SELL 39 February, 2018 (TLT) $130 puts at...................................................$7.40
Buy to cover short 39 February, 2018 (TLT) $127 puts at.................................$4.45
Net Proceeds:....................................................................................................$2.95
Profit: $2.95 - $2.60 = $0.35
(39 X 100 X $0.35) = $1,365 or 13.46% in 12 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.