Trade Alert - (TLT) March 2, 2020 - BUY
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) – BUY
BUY the iShares Barclays 20+ Year Treasury Bond Fund (TLT) March 2020 $162-$165 in-the-money vertical bear put spread at $2.50 or best
Opening Trade
3-2-2019
expiration date: March 20, 2020
Portfolio weighting: 10%
Number of Contracts = 40 contracts
With the Mad Hedge Market Timing Index wildly oversold at 12, I believe we are about to see a new dive in bond prices. My 1.00% target for the ten-year US Treasury bond was nearly hit last night.
I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) March 2020 $162-$165 in-the-money vertical bear put spread at $2.50 or best
Don’t pay more than $2.75 or you’ll be chasing.
If you don’t do options, buy the ProShares Ultra Short 20 Year Plus Treasury Bond ETF (TBT) outright for a quick pop.
This is a bet that the (TLT) will not rise above $162.00 by the March 20 option expiration in 14 trading days. To lose money on this position, ten-year US Treasury yields would have to rise fall below 0.75%. That is a bet I am willing to make on top of a ballistic 20-point rise.
The fundamental reasons for this trade are quite simple. Quantitative easing is ramping up again on a global basis, including the US. The futures market is now anticipating a 90% chance that there will be three 25 basis point cuts in the near future.
Most of that money ends up in US stocks and bonds. More money creates more buying of everything. It’s really that simple.
The US now has among the world’s highest interest rates. They are about to join the ranks of the world’s lowest.
Some 35% of the world’s outstanding government debt now has negative interest rates. In Germany, the figure is an eye-popping 88%. That is hugely bearish for bond prices everywhere.
Here are the specific trades you need to execute this position:
Buy 40 March 2020 (TLT) $165 puts at…………...………$8.00
Sell short 40 March 2020 (TLT) $162 puts at……………$5.50
Net Cost:………………………….………..….......………..….....$2.50
Potential Profit: $3.00 - $2.50 = $0.50
(40 X 100 X $0.50) = $2,000 or 20.00% in 14 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 on How to Execute Vertical Call and Put Debit Spreads by clicking here.
You must be logged into your account to view the video.
Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage. In today's market, investors need every advantage they can get.
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 close to expiration.
If you don't get done, don't worry. There are another 250 Trade Alerts coming at you over the coming 12 months.