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) – STOP LOSS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2020 $170-$175 in-the-money vertical Bear Put spread at $4.10 or best
Closing Trade
5-15-2020
expiration date: June 19, 2020
Portfolio weighting: reduce from 20% to only 10%
Number of Contracts = 26 contracts
I had a big profit in this position days after I put it on. I caught the better part of a ten-point dive in bond prices. Now, we have seen an eight-point move against us. In the meantime, the momentum in the bond market has turned against me, taking me too close to our lower strike price to risk a double position.
Once again, the harsh lesson has been learned, that in a market this volatile, you don’t let positions grow hair on them. If you have a reasonable profit, you grab it as fast as you can. Easy money can disappear as fast as it arrived.
I am therefore selling the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2020 $170-$175 in-the-money vertical Bear Put spread close to cost at $4.10 or best.
If you have the ProShares Ultra Short 20 Year Plus Treasury Bond ETF (TBT) outright keep it for a medium-term investment.
This was a bet that the (TLT) would not rise above $170.00 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 0.35%.
Here are the specific trades you need to exit this position:
Sell 26 June 2020 (TLT) $175 puts at………….……........…$9.30
Buy to cover short 26 June 2020 (TLT) $170 puts at……$5.20
Net Proceeds:………………………….………..………...….….....$4.10
Loss: $4.10 - $4.00 = $0.10
(26 X 100 X $0.00) = $260, or 2.50%.
The Fat Lady is Singing for the Bond Market
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.
