Trade Alert - (TLT) June 24, 2020 - 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) July 2020 $172-$175 in-the-money vertical Bear Put spread at $2.90 or best

Closing Trade

6-24-2020

expiration date: July 17, 2020

Portfolio weighting: 10%

Number of Contracts = 40 contracts

As of now, we have 80% of the maximum potential profits in this position. The risk/reward of continuing is no longer favorable. And we do have a hugely overweight position in our bond shorts.

I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) July 2020 $172-$175 in-the-money vertical Bear Put spread at $2.90 or best. By coming our here, you get to take home $1,600. or 16% in 13 trading days.

The fundamentals of this trade are very simple. With the national debt already rising from a record $26 trillion to an eye-popping $32 trillion by the end of 2020, the US Treasury demands on the bond market are going to be incredible. Debt to GDP now stands at 113% but will rocket to 147% by next year.

It is almost mathematically impossible for bond prices to rise. They can only go sideways at best, or down big in the worst case. Sounds like a great short to me. This could be the start of the greatest short play in history.

This was a bet that the (TLT) would not rise above $172.00 by the July 17 option expiration in 34 trading days. To lose money on this position, ten-year US Treasury yields would have to approach near 0.30%.

Here are the specific trades you need to exit this position:

Sell 40 July 2020 (TLT) $175 puts at……...............…….………$13.50

Buy to cover short 40 July 2020 (TLT) $172 puts at……..……$10.60

Net Proceeds:………………………….……….............………….….....$2.90

Profit: $2.90 - $2.50 = $0.40

(40 X 100 X $0.40) = $1,600 or 16% in 13 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 by clicking here.

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.