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DEFI: UniSwap - ALL YOU NEED TO KNOW 🦄Hi Traders, Investors and Speculators of the Charts 📈📉 If you’ve been following me on TradingView for a while, you’ll now that I’m a believer – a believer in the promise of blockchain. One of the principals of this promise is to move away from centrally controlled banking systems. This would eventually include the act of saving and earning interest for the money that you leave in the capable hands of your banker (who also gets to decide whether or not you qualify for loans). Currently, you need to give up all of your personal information to open a bank account and furthermore you are seriously undercut in the returns / interest rate that you will be receiving (to name only two of many problems with the system). For example, where I reside, the most common interest on a savings account is 5% annually, whereas the interest on your credit card is 19.5% annually. And this is, in short, the common argument for Decentralized Finance. Before we continue, familiarize yourself with these key terms: TVL – Total Dollar Value Locked in the platform DEX - A decentralized exchange. DEXs don't allow for exchanges between fiat and crypto — instead, they exclusively trade cryptocurrency tokens for other cryptocurrency tokens. Blockchain – A unique way of coding that is open for anyone to use, many believe that web3 will be built on top this kind of coding DeFi – Decentralized Finance such as cryptocurrencies and stablecoins dApp – Software like apps that work on the basis of blockchain code and thus apps that accommodate cryptocurrency such as UniSwap and NFT Market places LP tokens - New liquidity pool tokens. LP tokens represent a crypto liquidity provider's share of a pool, and the crypto liquidity provider remains entirely in control of the token. For example, if you contribute $10 USD worth of assets to a Balancer pool that has a total worth of $100, you would receive 10% of that pool's LP tokens. APY - Annual Percentage Yield, think of it as yearly interest in percentage Smart Contracts — E lectronic, digital contracts coded to integrate with dApps. Automated financial agreements between two or more parties once the pre-determined terms of the contract is reached Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts (liquidity pools) to execute trades on its exchange. It's an open source project and falls into the category of a DeFi product (Decentralized finance) because it uses smart contracts to facilitate trades. Built on Ethereum, Uniswap is the first and largest DEX in DeFi and one of the many places where you can participate in yield farming. To earn interest in their cryptocurrency holdings, investors contribute their funds to a Uniswap smart contract; these investors are known as liquidity providers. The smart contracts that hold their cryptocurrencies are known as liquidity pools. Liquidity providers are required for Uniswap to function since they provide liquidity for trading on the platform. With the rise of Blockchain, Crypto and then Decentralized apps, yield farming was born to address some of the banking system's limits. Or at least, that would be in the perfect world. Yield farming is the process of using DeFi to maximize returns . Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services. This works for both parties, because yield farmers provide liquidity to various token pairs and you earn rewards in cryptocurrencies. However, yield farming can be a risky practice due to price volatility , rug pulls, smart contract hacks etc. Yield farming allows investors to earn interest which is called ‘yield’ by putting coins or tokens in a dApp, which is an application (coded software) that integrates with blockchain code. Examples of dApps include crypto wallets, exchanges and many more. Yield farmers generally use decentralized exchanges (DEXs) to lend, borrow or stake coins to earn interest and speculate on price swings. Yield farming across DeFi is facilitated by smart contracts. Let’s take a closer look at the different types of yield farming on UniSwap: Liquidity provider: You deposit two coins to a DEX to provide trading liquidity. Exchanges charge a small fee to swap the two tokens which is paid to liquidity providers. This fee can sometimes be paid in new liquidity pool (LP) tokens. Lending: Coin or token holders can lend crypto to borrowers through a smart contract and earn yield from interest paid on the loan. Borrowing: Farmers can use one token as collateral and receive a loan of another. Users can then farm yield with the borrowed coins. This way, the farmer keeps their initial holding, which may increase in value over time, while also earning yield on their borrowed coins. Staking: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield. Yield farmers who want to increase their yield output can also use more complex tactics. For example, yield farmers can constantly shift their cryptos between multiple loan platforms to optimize their gains. Back to DeFi - In centralized finance, your money is held by banks and corporations whose main goal is to make money. The financial system is full of third parties who facilitate money movement between parties, with each one charging fees for using their services. The idea behind DeFi was to create a system that cuts out these third parties, their fees and the time spent on all the interaction between them. Defi is a technology built on top of blockchain - it can be an app or a website for example, which means that is was written in code language by software programmers. It lets users buy and sell virtual assets (like crypto and NFT's) and use financial services as a form of investment or financing without middlemen/banks. This means you can borrow , lend and invest - but without a centralized banking institution. In summary, DeFi is a subcategory within the broader crypto space. DeFi offers many of the services of the mainstream financial world but controlled by the masses instead of a central entity. And instead of your information being filed on paper and stored by a banker, your information is captured digitally and stored in a block with your permission. Many of the initial DeFi applications were built on Ethereum (which is a blockchain technology, but the code is different to Bitcoin's, in other words it operates/works differently). The majority of money in DeFi remains concentrated there. Lending may have started it all, but DeFi applications now have many use cases, giving participants access to saving, investing, trading, market-making and more. Another example of such a market is PancakeSwap (CAKEUSDT). PancakeSwap is also a decentralized exchange native to BNB Chain (Binance chain). In other words, it shares some similarities with UniSwap in that users can swap their coins for other coins. The only difference is that PancakeSwap focuses on BEP20 tokens – a specific token standard developed by Binance. The BEP20 standard is essentially a checklist of functions new tokens must be able to perform in order to be compatible with the broader Binance ecosystem of dapps, wallets and other services. 💭 Final Thoughts 💭 Is yield farming profitable? Short answer - Yes. However, it depends on how much money and effort you’re willing to put into yield farming. Although certain high-risk strategies promise substantial returns, they generally require a thorough grasp of DeFi platforms, protocols and complicated investment chains to be most effective. Is yield farming risky? Short Answer - Absolutely . There are a number of risks that investors should understand before starting. Scams, hacks and losses due to volatility are not uncommon in the DeFi yield farming space. The first step for anyone wishing to use DeFi is to research the most trusted and tested platforms. _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
Education
by CryptoCheck-
29
Producing Recurring Income in GoldGold has long been a darling of investors. Its holders - whether households or central banks - seek refuge in the yellow metal in times of crisis. Gold is a resilient store of wealth, offers durable portfolio diversification, exhibits lower volatility relative to equities & bonds, and serves as an inflation hedge. But it has a big downside. As mentioned in our previous paper , gold pays zero yield. Shares pay-out dividends. Debt earns interest. Property delivers rents. But gold? Zero! There are multiple methods of generating yield from gold. This paper illustrates a risk-limited, easy to execute, and capital-efficient means of producing yield by investing in gold. Innovation in financial markets enables even non-yielding assets such as gold to produce regular income. A class of derivatives known as call options can be cleverly deployed to generate yield. Call options are derivative contracts that allow its buyers to profit from rising prices of the underlying asset. When prices rise, call option holders earn outsized gains relative to the options price ("call premiums"). Unlimited upside with limited downside describes the call option holder's strategy in summary. What has that got to do with generating yield in gold? Everything. For every buyer, the market requires a seller. Options sellers collect call premiums which comprise the income. Many widely believe that options are weapons of mass wealth destruction. Not entirely wrong. Used poorly, options devastate investors' portfolios. Deployed wisely, options help astute traders to better manage their portfolio, generate superior yield on their assets, and construct convexity (disproportionate gain for fixed amount of pain) into their investing strategies. Fortunately, a covered call is a strategy which uses options prudently. As the strategy involves holding the asset whose prices are expected to rally, the risk of the strategy is hedged with risks well contained. Gold Covered Call involves two trades. A long position in gold and a short position in out-of-the-money gold calls. In bullish markets, investors gain from call premiums plus also benefit from increase in prices. Covered calls not only enable investors to generate income but also reduce downside risk if asset prices tank. A covered call trade in gold can be implemented in a margin efficient manner using CME’s Gold Futures and Options. A long position in CME’s Gold futures (“Gold Futures”) gives exposure to 100 troy ounces (oz) of gold per lot. Combining long futures with a short call option on Gold Futures at out-of-the-money strike allows investors to harvest premiums. Selecting an optimal strike and an expiry date is critical to successfully execute covered call strategies. First, Strike. It is the price level at which the call option transforms to be in-the-money. Strikes which have daily volumes & meaningful open interest enable options to be traded with ease and provide narrow spreads. Strikes that make options expire worthless benefits the covered call options holder. Second, Expiry. Options have expiry. Options sellers thrive on shrinking expiry for generating yields. Investors selling call options optimise their risk-return profile by selecting an expiry with higher implied volatility (IV). Option prices are directly proportional to IV. Higher IV leads to larger premiums enriching returns. SIMULATION AND PAY-OFF MATRIX This paper illustrates a covered call strategy in gold using the CME Gold derivatives market: 1. Long one lot of Gold Futures expiring in Oct (GCV3) at $ 2,050/oz. 2. Sell one lot of Call Options on Gold Futures expiring in Oct at a strike of $ 2,275 collecting a premium of $ 40/oz. The pay-off matrix simulates the trade P&L under four likely outcomes among many possibilities at trade expiry: a. Gold rises past the strike ($ 2,400): Options get assigned to the buyer. Covered call option holder incurs loss of $ 85/oz (=$ 2,400 - $ 2,275 - $ 40) from short call offset by profits from long futures ($ 350 - $ 85) = $ 265/oz. Each GC contract has 100 troy ounces of gold, so total profit will be $ 265 x 100 = $ 26,500. b. Gold rises but remains below the strike ($ 2,250): Options expire worthless to the buyer. Seller retains premium in full. Covered call option holder profits from long futures + call options premium ($ 200 + $ 40) = $ 240/oz. Each GC contract has 100 troy ounces of gold, so total profit will be $ 240 x 100 = $ 24,000. c. Gold price falls marginally below the entry price ($ 2,030): Options expire worthless to the buyer. Covered call option holder loses money from long futures and thankfully the loss is offset by call options premium (-$ 20 + $ 40) = $ 20/oz. Each GC contract has 100 troy ounces of gold, so total profit will be $ 20 x 100 = $ 2,000. d. Gold price falls ~5% below the entry price ($ 1,950): Options expire worthless to the buyer. Covered call option holder loses money from long futures and the loss is partially offset by call options premium (-$ 100 + $ 40) = -$ 60/oz . Each GC contract has 100 troy ounces of gold, so total loss will be -$ 60 x 100 = -$ 6,000. The chart below describes the pay-off from Gold Futures (Long position), Gold Call Options (short position) and Covered Call (combination of the two trade legs). MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
COMEX:GCV2023Education
by mintdotfinance
3
Inflation & Interest Rate Series – Below 5.3% is Crucial for CPIContent: • Why CPI must be below 5.3%? • Can we invest or trade or hedge into inflation? Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. Stay tuned for our next episode in this series, we will discuss more on the insight of inflation and rising interest rates. More importantly, how to use this knowledge, turning it to our advantage in these challenging times for all of us. Micro 5-Year Yield Futures 1/10 of 1bp = US$1 or 0.001% = US$1 3.000% to 3.050% = US$50 3.000% to 4.000% = US$1,000 See below ideas on the previous videos for this series.
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CBOT_MINI:5YYU2022Education
by konhow
4
Can Interest Rate Be Traded Or Invested?How can we participate in the rise and fall of interest rate? Firstly, we need to understand the difference between interest rate and yield. Interest rates are a benchmark for borrowers whereas yield is for investors or lenders. • Interest rates are the fees charged, as a percentage from a lender for a loan. • Yield is the percentage of earnings a person receives for lending money. Both move in tandem together, meaning if yield moves higher, interest rates will follow. Discussion: • Direction of the Yield in the short-term and • Direction of the Yield in the long-term Divergence in a bull market means the bull is losing its momentum, keep a look-out for trigger points that may cause further stress to the market. Micro 10-Year Yield Futures 1/10 of 1bp = US$1 or 0.001% = US$1 3.000% to 3.050% = US$50 3.000% to 4.000% = US$1,000 Note: Micro Treasury futures are not micro-sized U.S. Treasury securities. They convey no rights of ownership, nor or they pay or accrue interest. Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
TVC:US10YEducation
by konhow
HEX is the greatest CryptocurrencyHEX is an ERC20 token that was released December 2019 after over a year in development, with 2 Security Audits as well as 1 Economic Audit. Since the 2019 release the smart contract has worked flawlessly with zero downtime or hacks. It’s immutable code that has no admin keys and multiple front ends built by the community to access its signature feature “Staking”. The major difference between HEX and Bitcoin or Ethereum is the fact the coin inflates at a maximum of 3.69% per year, but instead of paying miners to sell the coin to pay for electricity costs, HEX pays those who Stake their coins. Everything is done from your self custodial Ethereum wallet and you pick how long to stake, from 1day up to 5555days. The longer you stake the more yield you generate, just make sure you’re truthful to the smart contract because if you end your commitment before 50% of time served you will lose some of your principal as well as interest earned. All of those who honor their commitment and end their stake on time benefit from those who ended theirs early or late. Most people have built what’s called a Staking Ladder staking different amount of HEX coins for various amounts of time (Like a traditional CD) so they always have a stake coming due. The yield isn’t paid in USD it’s paid in HEX so the price of the asset can go up substantially higher once your stake matures and then people just sell a portion of their yield and never kill their golden goose, restaking the rest! Just in its first 2 years HEX did a 10,000x at its ATH in September 2021! If you stake longer then the average stake length (currently at 6.49yrs) you will be earning over 39%APY (in HEX). This is how so many people have created life changing wealth for themselves using the staking feature no matter what price they originally bought at! Why would you buy and hodl a coin that doesn’t pay you to hold it? Why not just keep a small % liquid and stake the rest paying yourself every year for the next 15years? That way you’re earning high %APY on the longer stakes and your paying yourself yearly or whenever you want? If you keep some liquid you will always have the opportunity to capitalize on the volatile nature of cryptocurrency.
Education
by HEXICAN
1
🎓 EDU 7 of 20: Use the Power of Intermarket Analysis 🔀Intermarket analysis is an often neglected and overlooked type of analysis among traders. However, it's a powerful tool that can help you anticipate future price movements by following the performance of other, closely-related markets. Intermarket analysis refers to the analysis of other asset classes that can provide valuable and actionable insights into related markets, such as forex. In this part of our Intermarket analysis lesson, we'll be focusing on a specific asset class that has a very close connection with currencies: the sovereign bond market and yields. As you already know from my previous educational posts, currencies tend to follow interest rates. With the fall of the Bretton Woods agreement, currencies became freely-floating and capital started to move to places with the highest yields, which meant higher returns for investors. For example, if Australia has a 3% interest rate and Japan a 1% interest rate, investors could buy AUD to collect a 3% rate and short JPY by paying a 1% rate, leaving them with a net profit of 2%. This is how carry trade work, and the long AUD/JPY was one of the most popular carry trades given the large yield differential between Australia and Japan. That's why you need to follow yield differentials in your trading. The chart above shows the EUR/USD pair, and the 2-year yield differentials between 2-year German bonds and 2-year US bonds. Notice that we're using German bonds (also known as "bunds"), since Germany is the largest European economy. To add yield differentials to your chart, simply hit the "+" (compare) above your chart and type in "DE02Y - US02Y" with a space between the symbols. This also works for other currencies. Here is a list of symbols for the major currencies and their respective bond yields: US02Y, CA02Y, GB02Y, DE02Y, JP02Y, AU02Y, and NZ02Y. The currency should be self-explanatory from the symbols (note, we also the German 2-year yield when analyzing CHF.) Notice how the exchange rate closely followed the differentials in yields. When German yields rose compared to US yields, capital inflows to the euro area increased demand for EUR, which lifted the exchange rate. Similarly, when US yields rose compared to German yields, capital inflows to the US increased demand for USD, and the EUR/USD pair fell (meaning a stronger USD.) The dots you see on the chart are the individual bond yields (DE02Y and US02Y), because I like to have a picture of why the yield differential line is rising or falling (i.e., did the line fall because US yields are higher, or because German yields are lower?) We are using the 2-year yields, because they tend to closely follow the monetary policy stance of the respective central bank. In other words, when the ECB turns hawkish, the DE02Y tends to rise (signaling higher interest rate expectations), which in turn would push the yield differential line higher (and most likely the EUR/USD pair as well.) In the next part of Intermarket Analysis, we'll take a look at how other markets can impact currencies, like metals, commodities, and energy. Please hit the "Like" button and follow, so you won't miss future trade ideas and educational posts!
Education
by MujkanovicFX
The Basic properties of BONDSA bond is a contractual agreement between an issuer and the bondholder. Owning a bond is like enjoying a stream of future cash flows. There are several important features that every bondholder must know before acquiring them: • The bond properties – issuer, maturity, principal, coupon rate and frequency, and the currency in which they are denominated. These properties are determinants of the investor’s expected and actual returns. • The tax and legal framework that applies to the contract between issuer and bondholder • The contingency provisions that affect the bond’s scheduled cash flows. In this article, we will focus on the bond properties and go through them one by one. Issuer Many entities can issue bonds. Usually, bond issuers are classified into categories based on their characteristics: 1. International organizations: World Bank etc. 2. Sovereign governments: The Unites States of America, The United Kingdom, Japan, Germany, etc. 3. Local governments: states, regions, counties 4. Companies: corporate issuers 5. Specialized legal entities Bondholders are exposed to credit risk , that is the risk of loss resulting from the issuer failing to pay the interest and/or repayment of principal. The issuer’s creditworthiness is rated by credit rating agencies . Maturity The maturity date of a bond refers to the date on which the issuer is obligated to pay the outstanding principal amount . A bond’s term of maturity is the length of time in which the bondholder will receive the interest payments on the principal. One notable exception is the perpetual bond , which is a fixed income security with no maturity date. Principal amount The principal amount of a bond is the amount the issuer agrees to pay the bondholder once the bond reaches maturity. The amount is also referred to as par value or nominal value . Bond prices are traded and quoted as a percentage of the principal amount. For example, if a bond’s par value is $100, a quote of 98 means that the price of the bond is worth $98. If the bond is trading below the par value it is said that it is trading at a discount . If the bond is traded above the par value it is said that it's trading at a premium . Coupon rate and frequency The coupon rate of a bond is the interest rate that the issuer agrees to pay each year to the bondholder until it reaches the maturity date. The annual sum paid is called the coupon . For example, a bond with a coupon rate of 3% and a par value of $10000 will pay an annual interest of $300. A conventional bond pays a fixed income rate. However, there are bonds that pay a floating rate of interest; these bonds are called floating-rate notes . All bonds make periodic coupon payments except for zero-coupon bonds , which trade at a discount of their par value and pay zero annual interest. Currency denomination Bonds can be issued in any currency although the largest number of bond issues are made in US dollars or euros. The currency of issue may affect the attractiveness of the bond, that’s why issuers from many countries in the world choose these 2 currencies to attract international investors and offset the disadvantages of their local currencies. Trade with care. If you like our content, please feel free to support our page with a like , comment & subscribe for future educational ideas and trading setups.
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TVC:US10YEducation
by financialflagship
77
The Best Yield Curve Tutorial You've Ever ReadThe two year has remained relatively flat since this week's open. However it did gap up significantly. Why is the 30 year falling (see linked article) while the two year remains consistent? Bonds of different maturities care about different things. In particular, the shorter end of the spectrum cares less about the long term effects of inflation and the general position in the economic cycle than the long end. Why? Those effects will be felt less in two years than the short term effects of interest rate decisions or the sentiment about it. Conversely, the 30 year has more time to price in these factors. It has to take in the considerations above, and more. Hence why the 30 year is tumbling right now, as it's more sensitive to risk sentiment and longer term factors. Don't forget that bonds are fixed income products, meaning they pay a yield that is inversely proportional to the price. The difference between the yield at either end of the spectrum is commonly referred to as the yield curve . The yield curve could also refer to a plot of the set of all yields on treasury products of various maturities. The difference between the two ends could narrow, or flatten . It could also steepen . Furthermore, that flattening or steepening could be driven by either end. In this case it is led by the long end. Since prices are decreasing (on account of risk on sentiment), we call this a long end led bear steepener . If you liked this analysis, subscribe for more content. Also check us out at Ghost Squawk!
CBOT:ZT1!Education
by quantguy
The 10-Year US Treasury Yield Makes HistoryThe 10-Year US Treasury Yield made new all-time lows this week. History was made as it went below 1%! On TradingView, you can chart Government bond prices and bond yields around the world. Bond prices are important because they can highlight risk appetite and desire for yield. To get started with charting Government Bond Yields, search for these combinations: US10Y - US Government Bonds 10-Year Yield ES10Y - Spain Government Bonds 10-Year Yield DE10 - German Government Bonds 10-Year Yield JP10Y - Japan Government Bonds 10-Year Yield BR10Y - Brazil Government Bonds 10-Year Yield We hope you enjoyed this chart and demonstration on how Government Bond Yields can be charted on TradingView. Please press Like if you enjoyed it or leave a comment if you have any questions.
TVC:US10YEducation
by TradingView
5
EDUCATION: EMULATING YIELD VIA SHORT PUTOver time, my basic approach to my IRA has been to acquire shares at substantial discounts over time and to take advantage of "the three legs": (1) short call premium; (2) dividends; and (3) growth, with the eventual goal to be able to solely or predominantly rely on dividends post-retirement, since "growth" can periodically be elusive and short call premium collection on covered calls can vary widely, depending on movement of the underlying, implied volatility, and one's degree of "aggression."* Typically, this has involved selling puts as an "acquire lower" strategy, followed by share assignment, and then covering. However, as we all know, getting into stock at a particular price results in a less than agile setup. After all -- and regardless of whether you buy stocks outright or are assigned them -- once you're in stock, you're in at the price you bought or were assigned, and there's no amount of magic wand waving that will change the price at which you acquired, even if you shed tears and get buyer's remorse later. In comparison, staying in options as long as possible affords you greater flexibility as to potential acquisition price since you can roll for credit and therefore cost basis reduction before your getting full on into the shares. Relatedly, you can essentially "manipulate" the potential share price at which you're assigned by rolling the short puts down and out if you become unhappy with the strike at which you sold originally. All that having been said, what if I want to emulate dividend yield in the shares while I wait to get assigned at a discount? Well, there's a way to do that -- with short puts. Pictured here is an EEM June 19th '20 36 short put, paying .97 at the mid, with delta/theta metrics of 18/.36. 328 days out in time, it's the expiry nearest 365 days 'til expiry, and the delta'd strike (~18) that will pay something approximating the annualized dividend of $90.** In other words, this isn't the actual trade you'd put on to emulate dividend yield (although absolutely nothing prevents you from doing that), but rather a guide to tell you what delta and/or theta you'd need to sell in shorter duration to emulate the amount of annualized dividend. In this particular case, selling the September 20th 40 short put*** would potentially fit that bill. Paying a .30 credit, it has delta/theta metrics of 17.29/.69 with a theta burn nearly twice that of the longer-dated 36, with the downside being that the strike is obviously much closer to current price than the 18 delta sold out in time. However, the theta metric makes it conceivable that you could collect what amounts to the annual premium of .90 in three to four expiry cycles as compared to 12, assuming that the underlying goes sideways, up, or even down to a certain degree during your credit collection/divvy generation emulation process. Post fill, look to roll at extrinsic approaching worthless from the ~18 delta to an ~18 delta strike in an expiry that will pay a credit, aiming to collect at least .25 with any given roll. If you're not able to get at least .25 on a roll to a similarly delta'd strike without going out an absurd amount of time, consider rolling down and out more incrementally. Naturally, this begs the question of whether and under what circumstances it's worth being in stock versus short puts since you can emulate not only dividends, but also growth with short puts ... . But I'll leave that discussion for another day. * -- By "aggression," I mean what delta you're willing to sell as cover (i.e., 20 versus 30 versus 40 versus at-the-monied or even monied). ** -- The annual yield in EEM isn't great -- 2.08%, so I'm primarily using it as an example due to its excellent liquidity and market tightness in the off hours. *** -- Naturally, this is best done on weakness or in a higher implied volatility environment. EEM's at 7/16 here, so you're consequently not getting a ton of juice out of the 18 delta.
AMEX:EEMEducation
by NaughtyPines
Interest Rate Spikes Precede CorrectionsNotice the downward trend in the US10Y since the 80's, while government, corporate and consumer debt has exploded to all time highs. The achilles heel of massive debt levels are high interest rates, which end up causing slowed growth and economic contraction. With ever higher levels of debt, the level of interest required to put the economy in pain falls over time - thus why we see crashes and corrections even as the US10Y spikes to levels far below the historical average (~6.18%). Last year we popped above the "danger zone" trend line and we saw what happened. Watch out for interest rate spikes, it can save your ass.
SP:SPXEducation
by Derivati_Capital
3