Trade Alert - (TLT) July 6, 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) July, 2017 $130-$133 in-the-money vertical BEAR PUT spread at $2.98 or best
Closing Trade
7-6-2017
expiration date: July 21, 2017
Portfolio weighting: 10%
Number of Contracts = 37 contracts
I am going to take the home run here.
The complete collapse of bond prices since we added this short position nine trading days ago has given us an 11.50% profit.
The chances of the bond market rallying seven points back up to our $130 strike price are virtually nil. Our spread is now trading close its expiration value of $3.00.
The risk/reward of continuing until the July 21 expiration day in 11 trading days is no longer favorable.
It is better to have dry powder in hand so you can sell bonds short again on the next surprise rally, if that ever happens.
So I am going to SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June, 2017 $130-$133 in-the-money vertical BEAR PUT spread at $2.98 or best.
If you can't get this price today, then re-enter the order tomorrow, or the next day or eventually you will get done.
However, it is not a bad idea to go into cash today, so tomorrow's June Nonfarm Payroll Report doesn't deliver any unwelcome surprises. The last two have been disappointments.
If you bought the the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall, instead, you might also take a short term profit there as well.
You have a 10% profit there as well.
To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bear Put Spread by clicking here at
https://www.madhedgefundtrader.com/ltt-vbpds/
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:
SELL 37 July, 2017 (TLT) $133 puts at.................................$9.85
Buy to cover short 37 July, 2017 (TLT) $130 puts at......................$6.87
Net Proceeds:.................................................$2.98
Profit: $2.98 - $2.67 = $0.31
(37 X 100 X $0.31) = $1,147 or 11.50% in 11 trading days.
