Trade Alert - (TLT) May 21, 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) May 2021 $143-$146 in-the-money vertical Bear Put spread at $3.00
Closing Trade - NOT FOR NEW SUBSCRIBERS, YOUR TURN WILL COME
5-21-2021
Expiration date: May 21, 2021
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Since we added this position, shares of the United States Treasury Bond Fund (TLT) have risen by $1.14 to $137.58. That is miles away from the nearest $143.00 strike price for this position.
As a result, we are now a very safe cushion to take us into the option expiration at the end of today. I think it’s safe to call it a win. Therefore, you will get to take home $1,840, or 18.40% in 33 trading days.
Well done and on to the next trade!
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 May 24 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.
This trade is basically betting that interest rates will rise in front of the biggest borrowing in human history.
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 and interest rates to fall 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 $143.00 by the May 21 option expiration in 33 trading days. To lose money on this position ten-year US Treasury yields would have to plunge to 1.34% from the current 1.64%, which they won’t three weeks.
Pigs would have to fly first.
Here are the specific actions you need to close out this position:
EXPIRATION of 40 May 2021 (TLT) $146 puts at………..….$8.42
EXPIRATION of short 40 May 2021 (TLT) $143 puts at……$5.42
Net Proceeds:…………………….......…….………..………….….....$3.00
Profit: $3.00 - $2.50 = $0.50
(40 X 100 X $0.50) = $2,000, or 20.00% in 33 trading days.
The Fat Lady is Singing for the Bond Market
