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Trade Alert - (TLT) May 1, 2020 - BUY

Trade Alert

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.


Alert

 

Trade Alert - (TLT) – BUY

BUY the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2020 $175-$180 in-the-money vertical Bear Put spread at $4.10 or best

Opening Trade

5-1-2020

expiration date: June 19, 2020

Portfolio weighting: 10%

Number of Contracts = 24 contracts

Bonds have just rallied 1 ½ points off of today’s low, so I am going to leap in for the kill once again. I’m sorry, but one of the best trades in years is worth pursuing to the ends of the earth.

This time, I am increasing my short position with a longer-dated six-week play on the June options expiration.

Bond option volatilities are still spectacularly high, offering ample opportunities to make money with vertical bear put spreads.

The fundamentals of this trade are very simple. With the national debt already rising from a record $23 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.

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.

I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2020 $175-$180 in-the-money vertical Bear Put spread at $4.10 or best.

Don’t pay more than $4.40 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 medium-term investment.

This is a bet that the (TLT) will not rise above $175.00 by the June 19 option expiration in 34 trading days. To lose money on this position, ten-year US Treasury yields would have to approach 0.30%.

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

Buy 24 June 2020 (TLT) $180 puts at………….………$14.00

Sell short 24 June 2020 (TLT) $175 puts at……...……$9.90

Net Cost:………………………….………..………….…...........$4.10

Potential Profit: $5.00 - $4.10 = $0.90

(24 X 100 X $0.90) = $2,160 or 21.95% in 34 trading days.

 

 

 

To see how to enter this trade in your online platform, please look at the order ticket below, 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 a Vertical Bear Put Spread” 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.

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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.

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