Trade Alert – (TLT)- TAKE PROFITS
SELL the iShares 20+ Year Treasury Bond ETF (TLT) May, 2017 $126-$129 in-the-money vertical BEAR PUT spread at $2.97 or best
Closing Trade – NOT FOR NEW SUBSCRIBERS
5-11-2017
expiration date: May 19, 2017
Portfolio weighting: 10%
Number of Contracts = 38 contracts
I am going to take the home run here and rake in the profits in my position in the iShares 20+ Year Treasury Bond ETF (TLT) May, 2017 $126-$129 in-the-money vertical BEAR PUT spread.
This gives me a 15.56% profit in only 21 trading days.
With 93.60% of the maximum potential profit in hand, the risk reward for carrying on for six more trading days to expiration is no longer favorable.
Better to have dry powder in hand so we can take advantage of the next ratchet move up or down.
This trade takes our trailing one year performance up to an eye-popping 46.23%, one of the best in the hedge fund industry.
I know I’ve said this before, but the harder I work, the luckier I get.
This was a bet that the iShares 20+ Year Treasury Bond ETF (TLT) would not trade above $126 by the May 19th expiration date.
With the Federal Reserve expected to raise interest rates as early as June, our interest rate bet paid off big time.
Also, with my proprietary Mad Hedge Marketing Timing Index now dead on 50, prudence augurs in favor of reducing positions to a minimum.
If you didn’t do options and bought the ProShares Ultra Short 20+ Treasury Bond Fund (TBT) instead, a bet that bonds will fall, keep it. It is going much, much higher.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of OptionsHouse.
If you are uncertain about how to execute this options spread, please watch my training video “How to Execute a Vertical Bear Put Spread” .
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 with only six days to expiration.
Please keep in mind these are ballpark prices at best. After the text alerts go out, prices can be all over the map. There is no telling how much the market will have moved by the time you get this email.
Paid subscribers, be sure you’ve signed up for our FREE text service for Trade Alerts. When seconds count, this feature offers a definite trading advantage. In today’s volatile markets, individual investors need every advantage they can get.
Here Are the Specific Trades You Need to Execute This Position:
Sell 38 May, 2017 TLT $129 puts at………….………$9.00
Buy to cover short 38 May, 2017 TLT $126 puts at.….$6.03
Net Proceeds:…………………………………..…….……..$2.97
Profit: $2.97 – $2.57 = $0.40
(38 X 100 X $0.40) = $1,520 or 15.56% in 21 trading days.
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ABOUT THE AUTHOR
The Diary of a Mad Hedge Fund Trader is written by John Thomas, one of the founding fathers of the modern hedge fund industry.
Seeing the incredible inefficiencies and severe mis-pricing offered by the popping of multiple bubbles during the Great Crash of 2008, and missing the adrenaline of the marketplace, he returned to active hedge fund management. With The Diary of a Mad Hedge Fund Trader, his goal is to broaden public understanding of the techniques and strategies employed by the most successful hedge funds so that they may more profitably manage their own money.
John graduated from the University of California at Los Angeles (UCLA) with a degree in biochemistry and a minor in mathematics in 1974. He moved to Tokyo, Japan to join a Japanese securities house as a research analyst, becoming fluent in Japanese. In 1976 he was appointed the Tokyo correspondent for The Economist magazine and the Financial Times. For the next seven years he published thousands of articles about the economies, companies, and leaders of Asia. He was one of the first American correspondents to cover China during the Cultural Revolution.