Trade Alert - (TLT) May 6, 2025 - 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) June 2025 $80-$83 in-the-money vertical Bull Call debit spread at $2.50 or best

 

Opening Trade

5-6-2025

expiration date: June 20, 2025

Portfolio weighting: 10%

Number of Contracts = 40 contracts

There is currently a battle going on within the bond market.

If inflation wins, interest rates will rise and bond prices will fall. If recession wins, interest rates will fall and bond prices will rise.

The 800-pound gorilla in the room is China, where no talks of any kind are taking place. As we learned during the pandemic, shortages of parts have a far more adverse effect on the economy than the price of the parts. As you learn in the Marine Corps, the lack of a 50-cent part can ground a $60 million fighter. That pushes me more towards the recession camp.

The only way to lose money on this trade is for the US economy to suddenly reverse and catch fire, causing interest rates to soar. That would send the (TLT) back to the January (TLT) lows. With investors currently drowning in uncertainty, the chances of that happening in the next 33 trading days are nil.

I am therefore buying the iShares Barclays 20+ Year Treasury Bond Fund (TLT) June 2025 $80-$83 in-the-money vertical Bull Call debit spread at $2.50 or best.

Don’t pay more than $2.70 or you’ll be chasing on a risk/reward basis.

If you don’t want to sit in front of a computer screen all day or live in a foreign time zone when the US stock market is closed, such as Australia, or don’t want to sit in front of a screen all day, simply enter a spread of Good-Until-Cancelled orders overnight, like  $2.50, $2.55, $2.60, $2.65, and $2.70. You should get done on some or all of these.

This is a bet that the (TLT) will not fall below $83.00 by the June 20 option expiration in 33 trading days.

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

Buy 40 June 2025  (TLT) $80 calls at………….………$7.50

Sell short 40 June 2025 (TLT) $83 calls at………..…$5.00

Net Cost:………………………….……….…......................$2.50

Potential Profit: $3.00 - $2.50 = $0.50

(40 X 100 X $0.50) = $2,000, or 20.00% in 33 trading days.

 

 

 

It’s now the Opening Act for the Bond Market

 

If you are uncertain about 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.