• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

Trade Alert - (TLT) June 20, 2012

Trade Alert

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)

Sell short the July, 2012 (TLT) $130-$135 calls spread at $0.54 or best

Opening Trade

6-20-2012

expiration date: July 17, 2012

Portfolio weighting: 10% = 25 contracts

With the ten year Treasury bond now yielding 1.60%, I think we are getting overextended on a short term basis. So I am going to sell short the July, 2012 (TLT) June $130-$135 call spread for a credit of $0.54 or best.

This is a bet that the (TLT) will not trade over $130.54 by the July 15 expiration, or up five points from here. That equates to a yield on the ten year Treasury bond of about 1.32%, which would be a new 60 year low, and quite a distance from here. That is a lot of real estate to cover in only 17 trading days.

If Greece forces us into major meltdown mode, we can always hedge this modest ?RISK ON? trade through taking more aggressive ?RISK OFF? positions, like selling short the (FXE), (SPX), (IWM), (GLD), or the (SLV).

By selling short the spread instead of the outright calls, your margin requirement drops by about 90%. Margin clerks vastly prefer limited risk trades, like this one, to open ended ones, no matter how unachievable the strikes may be. It is just all numbers to them. The total margin requirement for 25 X July, 2012 (TLT) $130-$135 call spreads should be a little north of $10,000, plus the premium realized.

If this spread expires worthless, as I hope, your total profit should amount to (25 X 100 X $0.54) = $1,350, or 1.35% for the notional $100,000 model portfolio. Professional bond traders do this sort of trade all day long.

The $130 level for the (TLT) also shows up as a major resistance point in all sorts of technical strategies. If you are unable to execute on this trade for any reason, treat it as an educational trade. Just sit it back and watch how it unfolds.

Don?t place a market order for this trade or the floor traders will rip your eyes out. Instead, place a limit day order in the middle market. If nothing happens then start raising your bid in 5 cent increments until something happens. These are the trades you should execute:

Sell short the July, 2012 (TLT) $130- calls at $0.77

Buy the July, 2012 (TLT) $135 calls at $0.23

Net Proceeds: $0.54

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://www.madhedgefundtrader.com/wp-content/uploads/2011/10/slider-05-trader-alert.jpg 316 600 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2012-06-20 13:24:342012-06-20 13:24:34Trade Alert - (TLT) June 20, 2012

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: A Day in the Life of the Mad Hedge Fund Trader Link to: A Day in the Life of the Mad Hedge Fund Trader A Day in the Life of the Mad Hedge Fund Trader Link to: June 21, 2012 - Quote of the Day Link to: June 21, 2012 - Quote of the Day June 21, 2012 - Quote of the Day
Scroll to top