March Treasury Bonds are up 24/32 at 118:08 this morning as I write. The included chart shows that T-Bonds are rebounding off of the 117:00 support area. The directional movement indicators are bearish and the ADX line is edging higher suggesting that there is more downside to come in prices. So, for now, this looks like a bounce in a bear move. Yesterday, following the year end Fed meeting, the commentary suggested more of the same, that is leaving short term rates between zero and ¼ of a percent. The Fed sees little worry about inflation for now, and will focus on keeping rates low to help the economy grow and hopefully see unemployment drop. That is basically what the Fed has been saying for months. If they want to see the economy grow faster, they are going to have to figure out a way to get banks to lend money again. We shall see.
The large trading range in T-Bonds is still bounded by 123:00 on the top and 117:00 on the bottom. I recommend holding current positions as is.
Followers should be:
Long one March Bond (114:00 strike) put option from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).
Long one March Bond (108:00 strike) put option from 52/64. (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).
Long one March Bond (117:00 strike) put option from 128/64.
Short one March Bond (113:00 strike) put option from 51/64.
March options expire in 64 days.
David Hall
The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.
This newsletter is not intended for dissemination to the public without prior approval from David Hall.
