Trade Alert - (TLT) October 16, 2017
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) TAKE PROFITS
SELL the iShares Barclays 20+ Year Treasury Bond Fund (TLT)October, 2017 $126-$128 in-the-money vertical BEAR PUT spread at $1.80 or best
Closing Trade-NOT FOR NEW SUBSCRIBERS
10-16-2017
expiration date: October 20, 2017
Portfolio weighting: 10%
Number of Contracts = 57 contracts
With only four days to expiration, I am going to cut my short bond position by half.
We are only 62 cents away from the lower (TLT) $126.00 strike price. If things suddenly go wrong, there is not enough time for them to go right again.
And with the near half point dump in the bond market this morning, we have an opportunity to get out of this position with honor.
When these spreads go against you, they do so big time.
I am therefore selling my position in the iShares Barclays 20+ Year Treasury Bond Fund (TLT) October, 2017 $126-$128 in-the-money vertical BEAR PUT spread at $1.80 or best.
Better to de-risk and raise cash here so we have plenty of dry powder for the next extreme move.
This still gets us a $285, or 2.86% in 7 trading days. It's better than a poke in the eye with a sharp stick.
Note that even though the (TLT) went against us on this trade, we still made money. This was an aggressive trade two months into a move down in bonds.
Such is the wonder of options spreads. Time decay into options expirations can be a life saver.
If you didn't do options and bought the ProShares Ultra Short 20+ Treasury Bond Fund (TBT), a bet that bonds will fall, keep it. It is going much higher.
Here are the specific trades you need to execute this position:
Sell 57 October, 2017 (TLT) $128 puts at.................................$2.60
Buy to cover short 57 October, 2017 (TLT) $126 puts at...............$0.80
Net Proceeds:................................................................................$1.80
Profit: $1.80 - $1.75 = $0.05
(57 X 100 X $0.05) = $285 or 2.86% in 7 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.
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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.
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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.