As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert – (TLT)
Buy the iShares Barclay 20+ Year Treasury Bond Fund (TLT) August, 2014 $117-$120 in-the-money bear put spread at $2.61 or best
expiration date: August 15, 2014
Portfolio weighting: 10%
Number of Contracts = 37 contracts
This is a bet that the 10 year Treasury bond yield doesn?t fall from today?s 2.47% to below 2.27%, and that the 30 year bold yield fails to decline from the current 3.26% to under 3.12% by the August 15 options expiration.
And they have to clock these big moves on top of already gigantic five point pops over the past two weeks.
Keep in mind that the options market is highly illiquid now, so don?t hold me to these prices. They are ballpark estimates, at best. It is clear that these desperate policies are already working.
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.
Here are the specific trades you need to execute this position:
Buy 37 August, 2014 (TLT) $120 puts at?????$4.95
Sell short 37 August, 2014 (TLT) $117 puts at..??.$2.34
Potential Profit: $3.00 – $2.61 = $0.39
(37 X 100 X $0.39) = $1,443 or 1.44% profit for the notional $100,000 portfolio.