The TLT Trade

On 1/12 I went long TLT by buying Feb 153 Calls for $1.80. The next day, as price moved higher, I sold the Feb 155 Calls for $1.60 leaving me with a $2 wide spread with a cost of just $.20! Then on 1/14 I turned the position into a Call Condor by selling a $2 wide Call credit spread for a $.20 credit. At that point I owned a Call Condor for free! Below are my actual transactions which I always post for the subscribers to see.

The tweet below was referring to the second adjustment to my initial position In TLT. To summarize; I saw a bullish setup on the daily chart, bought Calls and then Delta Hedged the position by first turning it into a Vertical spread then into a Condor as TLT moved higher in price. Pretty standard stuff for the Vega Options subscribers. Below is the zero cost tweet as well as the position after the adjustment.

I was fine continuing to hold that bullish zero cost position until the daily chart indicated a bearish setup. Time to close the bullish position? Hell no! I had no idea idea if that bearish setup would follow through or not. Here’s the tweet about the setup.

So if I wasn’t going to close the bullish position what do I do? Establish a new bearish position is the answer of course. I simply bought some Puts. I went bigger on the Put side then my initial Call purchase. Below is the current risk profile as of Friday’s close.

I’ll agree, not a great looking position! But, as always, let’s consider what it could look like with the application of a Delta Hedge. Below is the risk profile I could’ve have as of Friday’s close.

If you’re interested in learning more about how I establish trades and make adjustments to the positions, sign up for the free trial. What have you got to lose?

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Paul Frey is a 30+ year trader with experience in equities, options, and futures. In addition to trading he manages Vega Options providing option educational services to new and experienced traders who are looking for improved results. He teaches strategies and techniques that reduce or even eliminate the initial cost of a trade while still maintaining potential future profits.

01st Feb 2021

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