More selling, long bond looking for 112
The short end of the curve is showing signs of stability but the 30-year bond futures have failed to ignite any significant buying interest. It looks like more of the same to me. As mentioned in yesterday's newsletter, I am looking for a slide to nearly 112 in the long bond. I hope that you took our recommendation to buy back short puts at a small profit, as there will likely be a better put selling opportunity in the coming days.
Our clients participating in the 10-year note synthetic call were liquidated this morning near 112'20 and were able to sell the put for about 30 ticks. All in all, not a bad trade but wasn't what we had in mind. The net profit before commissions and fees was approximately $270. Aggressive traders may have held on to the put in hopes of additional weakness, as it turns out that would have turned out to be a great play. However, given the market conditions capital preservation is critical.
Once again, I am looking for a low in bonds but feel as though the long bond will be looking to hunt stops under 112'08. If this is the case, we could see 112 by early next week.
Treasury Option Trading Recommendations
**There is unlimited risk in naked option selling.
Oct. 10 - Sell the October 111 puts for 25 or better. You should have been filled on this today (Oct. 13).
· Oct. 14 - Place an order to buy these back at 10 or better.
· Oct. 16 - Get out of this with a small profit, we may be setting up for another drop to 112.
Treasury Futures Trading Recommendations
**There is unlimited risk in trading futures.
Sept. 13 - Buy 1 December 10 year note futures at 111'24 OB
· Oct. 14 - This should have been filled today.
· Oct. 15 - Clients were advised to buy the 112 puts for insurance for about 1'03 or $1,047. A little pricy, but worth the piece of mind; if the market rallies it may be a good idea to take a profit on the futures and hold the put looking for another probe at the lows.
· Oct. 17 - Our clients participating in the 10-year note synthetic call, were liquidated this morning near 112'20 and were able to sell the put for about 30 ticks. All in all, not a bad trade but wasn't what we had in mind. The net profit before commissions and fees was approximately $270.
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
www.DeCarleyTrading.com
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
