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TLT

SHORTING US GOVT BONDSLet me warn you now, this is not a fundamental or technical analysis based trade. This is a speculation on my behalf based on a simple theory. As the US Federal Reserve continues to rise interest rates up to 3x this year, is it time that a true bear market in fixed income has come to fruition? Are the "safe" government bonds becoming one of the worst asset classes to be in? I would say it is up there, with the exception of tech and anything blockchain. It takes some basic algebra to figure out if bond prices will go up or down based on interest rate increases or decreases the PRESENT VALUE (Price) of the bond. In short, interest rates rise and prices fall, interest rates decrease prices increases. For most bonds, depending on default risk, upon maturity you are paid the face value. You have security in your principle if you can afford to wait. Another interesting component is that the longer the yield to maturity of the bond, the more sensitive to rises and falls in interest rates. So with some Bonds 101 behind us, let me give you the trade. I propose that based on the projection that if interest rates rise three times this year as forecasted by the market, long term bond prices will decline in the short term (1-2 years), so I propose that, given the sentiment in the expectation of further increases in interest rates we short #TLT, a 20+ Year Govt Bond ETF sponsored by iShares. Some things to be wary of: If equity markets continue to fall, say to 20% down from highs, this could cause the federal reserve to STOP increasing rates. (speculation on my behalf) As well, if the markets do fall and firms start to go under (smaller scale 2008), don't be suprised if they start to bail firms out, look at how rich it made the government after 2008... Dodd Frank requires banks to be able to withstand up to 10% unemployment, $383 Billion in loan losses, as well as " heightened stress in corporate loan markets and commercial real estate." A fianancial collapse is probably not out of the question, but I'm saying that if any of the above scenarios start to play out, this trade would be out the window. So yeah, bold bet for sure, but might be something to think about. Please, tell me where you think I could be wrong.
NASDAQ:TLTShort
by StuartTabor
Interest Rates Look Bullish: TBF is the ETF to BuyOn December 20th I posted an idea for a long position in AMEX:TBF based on the likelihood of the asset breaking out of its long-term downtrend and short-term wedge pattern. Here is the link to the original idea: Today this breakout is taking place and I am initiating a long position in TBF. Given the technical backdrop and the fundamental/economic drivers, I believe this represents a solid opportunity for alpha generation. Initial Target Price: $25.00 Stop Loss: $21.49
AMEX:TBFLong
by BTCBanker1
THE WEEK AHEAD: CIEN, TLTEARNINGS CIEN announces earnings on 8/31 (Thursday) before market open. Due to the size of the underlying, I would probably go short straddle or iron fly here, as a short strangle and/or iron condor really don't pay. The Sept 8th 24 short straddle is currently paying a 2.35 credit at the door with break evens wide of the expected move, while the Sept 8th 21/24/24/27 iron fly pays 1.92 with break evens right at the expected. OTHER HIGH RANK/HIGH IMPLIED VOLATILITY PLAYS There are currently no other liquid high rank/high implied volatility individual stocks with >70%/>50% metrics out there I consider worth playing. For example, ANF and UNIT have the right metrics, but I can't seem to get enough premium out of a setup to make a play in either worthwhile. Similarly, there aren't any exchange-traded funds at >70%/>35% rank/implied volatility. LOW RANK/LOW IMPLIED VOLATILITY PLAYS TLT (9/10) has both low rank and lowed implied volatility such that a low volatility strategy might make sense (i.e., calendar or diagonal). The Oct/Dec 40 delta back/same strike front skip month 125 put calendar (say that three times fast) currently costs a 1.31 debit/contract to put on. Given the fact that you generally shoot for 10-20% max out of these, multiples might be required to make it worthwhile ... . VIX I've been waiting for a term structure trade opportunity for months now, but it looks like I'll have to continue doing the same. There aren't any /VX futures that are greater than 16 with 90 days or less to go; the first /VX expiry at greater than 16 is way out in March ... .
NYSE:CIEN
by NaughtyPines
FOUR OPTIONS TRADE IDEAS FOR NEXT WEEK: HTZ, TLT, GLD, AND XOP... , one high implied volatility (HTZ), two low implied volatility (TLT, GLD), and one long-dated bullish assumption oil trade (XOP). High Implied Volatility HTZ "Monied" Covered Call Buy 100 Shares at 16.96 Sell Oct 20th 15 call 13.99 db (your cost basis in the shares) 1.01 max profit if called away at 15 Notes: Roll the short call out for additional cost basis reduction if it doesn't finish at 15 or you can't exit the trade before expiry around that mark. It's only got monthlies, so some patience may be required if you are unable to get your candy right away. An alternative approach would be to sell the 12.5 short put in the Oct 20th expiry (currently trading at .50) and then look to cover (monied or otherwise), if assigned. Low Implied Volatility Both TLT and GLD are in low volatility territory here, so look to deploy low volatility strategies on them ... TLT Sept 15th/Dec 15th 125 put calendar 1.87 db GLD Sept 15th/Dec 15th 121 put calendar 1.63 db Notes: Roll the short put aspect out for duration "as is" on significant decrease in value, and look to exit the trade at 20% max of what you put it on for. Obviously, not "big money" plays, but also not big buying power pigs either ... . Long-Dated Neutral to Bullish Assumption Oil Trade XOP Oct 20th 31 short call/March 16th 21 long call Poor Man's Covered Call 8.06 db Notes: Roll the short call aspect of this setup out for duration and credit to reduce cost basis in the setup and look to exit the trade for 10-20% max of what you put it on for. For a longer duration setup with the potential to reduce cost basis in the entire setup to zero over time, consider the Oct 20th 31 short call, Jan 18th '19 20 long call Poor Man's for a 9.54 db. An alternative instrument to consider which is also oil sensitive is XLE, although a similar setup comes with a heftier "entry fee" -- the Oct 20th 65 short call/Jan 18th '19 50 long call costs 12.29 to put on.
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by NaughtyPines
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