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 $168-$171 in-the-money vertical Bear Put spread at $2.70 or best
Closing Trade
6-29-2020
expiration date: July 17, 2020
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Given the heightened risk profile in the market and the exploding pandemic, I am going to cut this position at close to even. The “re-closing” trade is on and igniting a flight to safety bid for bonds.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) July 2020 $168-$171 in-the-money vertical Bear Put spread at $2.70 or best. By coming out here, you get to take home $400, or 3.8% in 19 trading days.
This was a bet that the (TLT) will not rise above $168.00 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 0.50%.
Here are the specific trades you need to exit this position:
Sell 40 July 2020 (TLT) $171 puts at………................….………$7.00
Buy to cover short 40 July 2020 (TLT) $168 puts at……..……$4.30
Net Proceeds:………………………..........….………..………….….....$2.70
Profit: $2.70 - $2.60 = $0.10
(40 X 100 X $0.10) = $400 or 3.8% in 19 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.
