Trade Alert - (TLT) March 19, 2021 - EXPIRATION AT MAX PROFIT
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) – EXPIRATION AT MAX PROFIT
EXPIRATION of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) March 2021 $146-$149 in-the-money vertical Bear Put spread at $3.00
Closing Trade
3-19-2021
expiration date: March 19, 2021
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Since we added this position, (TLT) shares have plunged an eye-popping $5.27, or 3.76%. As a result, we now have a very safe cushion to take us into today’s quadruple witching options expiration on March 19.
I think it’s safe to call it a win. Therefore, you will get to take home $1,600 or 16.00% in 14 trading days.
You don’t have to do anything with this expiration.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, March 22 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
The memo is out now. Bonds have already dropped 25 in 2021 and the worst is yet to come. This is becoming a one-way trade. Therefore, I will be selling even small rallies, like the one we just saw.
With 2021 expected to be one of the strongest years for economic growth in history, there is no chance you’ll see a major rally in the US Treasury bond market from here. The only question is how fast it will fall.
The fundamentals of this trade are very simple. The national debt rose from a record $23 trillion to an eye-popping $28 trillion in 2020. In 2021, it is expected to explode to $32 trillion. The US Treasury demands on the bond market are going to be incredible.
It is almost mathematically impossible for bond prices to rise substantially from here. They can only go sideways at best, or down big in the worst case. Sounds like a great short to me.
This was a bet that the (TLT) will not rise above $146.00 by the March 19 option expiration in 14 trading days. To lose money on this position, ten-year US Treasury Yields would have to plunge to 0.85% from the current 1.04%, which they won’t in a month.
Here are the specific trades you need to close out this position:
EXPIRATION of 40 March 2021 (TLT) $149 puts at………….………$13.71
EXPIRATION of short 40 March 2021 (TLT) $146 puts at…………$10.71
Net PROCEEDS:……………..............…………….………..………….….....$3.00
Profit: $3.00 - $2.60 = $0.40
(40 X 100 X $0.40) = $1,600 or 16.00% in 14 trading days.
The Fat Lady is Singing for the Bond Market
