TBT
TBT - 4 week average good place to buyPrice support at a rising 4-week moving average often serves as a launching pad to higher prices.
US10YAn inverted yield curve (2/10) is an indicator but the 'cause'. Yields were 6%/5%/4% last times they were inverted and not 1.5% :) If corps can't afford to pay 1.5%, there is nothing Fed can do to resolve that issue. Policy issues are the cause and the cure is fiscal and not monetary. GL
Not a trading call, just sharing my view. Peace
THE WEEK AHEAD: ORCL, GDXJ, TBT, TLT, SMH, OIHEARNINGS
ORCL (50/29) releases earnings on Wednesday after market close, so look to put on a play in the waning hours of Wednesday's New York session.
Pictured here is a non-standard short strangle, with the short call side doubled up in order to compensate for greater than one dollar wide strikes: 1.30 credit, break evens at 48.70/58.15, and delta/theta of -5.52/58.15.
As of Friday close, the June 21st to July 19th monthly volatility contraction is from 46.6% to 29.3% or about 29.7%.
Look to manage intratrade by rolling the untested side toward current price on approaching worthless with a 50% max take profit target.
Generally, I don't play stuff this small that doesn't have dollar wides, since rolling intratrade can be a headache, as can rolling out, since there is limited strike availability. It's really another aspect of liquidity, which is not only about the width of markets intraexpiry, but also about the availability of expiries out in time, as well as strikes.
BROAD MARKET
EEM (27/20)
QQQ (23/20); NDX (24/20)
IWM (23/19); RUT (25/19)
SPY (21/15); SPX (19/15)
EFA (16/13)
With 33 days to go in the July cycle and 61 to go for August, we're kind of in the "in between" for the 45 days 'til expiry sweet spot, so I would wait until August comes closer into view for either broad market or sector if you want to keep things in that 45 days 'til expiry wheelhouse.
SECTOR EXCHANGE-TRADED FUNDS
Top 5 By Rank: GDXJ (62/31), TBT (52/24), TLT (51/12), SMH (50/31), OIH (49/40).
SINGLE NAME WITH EARNINGS IN THE REAR VIEW
A lot of earnings start kicking off in the July cycle, so would wait to play these as earnings announcement volatility contraction plays instead of wading in here and getting caught in a volatility expansion.
ME PERSONALLY
To keep things simple, mundane, and boring throughout the summer months, I'm looking to just to play broad market for the next couple of cycles -- SPY/SPX, QQQ/NDX, and IWM/RUT. (See, e.g., RUT Sept Iron Condor below).
THE WEEK AHEAD: CRM EARNINGS; QQQ, IWM, XOP, TBT, AAPL, TSLAEARNINGS
CRM (57/42) releases earnings on Tuesday after market close, so look to put on a play in the waning hours of Tuesday's New York session.
Pictured here is an iron condor in the July monthly with the short options nearest the 20 delta strikes. Preliminarily, it's paying 1.61 at the mid price with break evens wide of the expected move at 133.40/171.60 with delta/theta metrics of -.89/2.27.
As of Friday close, the June 7th weekly to July 19th monthly volatility contraction is from 61.8% to 39.0% or about 41.5%.
Look to manage intratrade by rolling the untested side toward current price on approaching worthless with a 50% max take profit target.
BROAD MARKET
EEM (38/21)
QQQ (36/23)
IWM (36/22)
SPY (37/19)
EFA (29/17)
The EEM July 19th 37/41/41/45 iron fly is paying just shy of 25% of the width of the longs (8-wide) at 1.99 and break evens of 39.01/42.99. Look to take profit at 25% max, as you would with a short straddle.
QQQ is paying slightly more than one-third the width of the wings for the short option strikes nearest the 20's -- the 158/161/185/188: 1.01 credit, break evens at 159.99/186.01, delta/theta metrics of -2.66/1.49. Manage intratrade by rolling in untested on approaching worthless toward current price; 50% max take profit.
The IWM iron condor nearest the 20 delta is the July 19th 133/136/154/157, with break evens of 135.01/164.99, delta/theta metrics of -3.27/1.43. 50% max take profit. Manage intratrade by rolling in untested on approaching worthless toward current price; 50% max take profit.
SECTOR EXCHANGE-TRADED FUNDS
Top 5 By Rank: TLT (65/13); USO (58/48); TBT (58/27); OIH (54/42); GDXJ (51/29).
The volatility in oil isn't a particular surprise. /CL (21/46) has been crushed from a late April high of 66.44 to a Friday session low of 53.05, leading to an OVX pop from the mid-20's to a Friday session high of 47.49, so it's an opportunity to sell premium in /CL, USO, or one of the closely correlated proxies like XOP (43/39).
TBT is at a 52-week low; TLT, a similar high with the yield on the 10-year T note yield cratering to finish last week at 2.142, so I could envision putting on a bullish assumption play in TBT either on the notion that we get some risk on post-May sell-off or that yield has bottomed in this vicinity (between 2.00-2.25).
A bullish assumption TBT short put in the July cycle at the 28 strike isn't paying a ton -- .43 at the mid, with a 27.57 break even and delta/theta metrics of 25.35/.85, but the more aggressive 29 pays .73 with a 28.27 break even and delta/theta metrics of 38.97/.96.
SINGLE NAME WITH EARNINGS IN THE REAR VIEW
X (66/61): The July 19th 12 straddle is paying 2.00, 10.00/14.00 break evens, and a delta/theta metric of -2.66/1.99.
AAPL (51/33): The July 19th nearest the 20 delta iron condor, the 155/160/190/195 is paying 1.67 with 158.33/191.67 break evens, and a delta/theta metric of -1.88/2.05.
TSLA (51/73): Some of the volatility leaked out last week, but the nearest the 20 -- the 140/145/215/220 appears to be paying 1.92 at the mid, assuming you can get filled there, with markets showing wide ... .
TBT divergence on MACD to upside is taking shapeA double bottom with an upside divergence in the MACD is taking shape. might be tad early but TBT is the leveraged ETF on the 20 year Treasury. Bought 10 contracts of the 33.5 puts expiring MAY 24 AT .09C BIT SPECULATIVE WE'LL SEE.
TRADE IDEA: TBT FEB/JUNE 31/37 UPWARD CALL DIAGONALMETRICS:
Max Loss on Setup: $422
Max Profit on Setup: $178
Break Even Versus Spot: 35.22 versus 35.37
Debit Paid to Spread Width Ratio: 70.3%
Delta: 50.2
Theta: .6
Notes: Tomorrow's the last day on which 2018 tax losses can be realized, so I can foresee some additional, last minute dumpage, followed by the Big Dicks buying the dip on Wednesday to position long anew on this weakness. I would ordinarily position straight up short in TLT, but want the mark left to be as small as possible in the event I'm dead ass wrong, and we continue in risk off mode (which will send TLT higher/TBT lower). I would note that the markets in the back month show somewhat wide at the moment, so the setup may require some fiddling at NY open either with the strikes or the fill price ... .
Long TBT (Short Treasuries and Long Rates)Daily TBT shows bull flag and seller exhaustion. Weekly bullish cloud ahead.
All major EMAs supporting the move higher, which means rates going to explode much higher. Bullish dollar $DXY and bearish gold $XAUUSD and miners $GDXJ $GDX
THE WEEK AHEAD: DAL, C, JPM, WFC EARNINGS; EWZ, TLT/TBTAlthough the earnings season has already kicked off modestly, a bevvy of financials announce next week: C, JPM, and WFC (all on Friday). I generally don't play these underlyings for volatility contraction around earnings primarily because the implied volatility just doesn't ramp up to the degree I'd like to see for a play. I thought I'd mention them here since there will be possible broad sector (XLF) impact depending on how these earnings go -- i.e., there could be a play that develops in one of these underlyings post-announcement or in the sector as a whole that may be worth playing.
Other Earnings: DAL (rank 41/30-day 32) announces earnings on Thursday before market open. The metrics don't look promising here for a directionally neutral premium selling play, but I could see going for something bullish if earnings experience engine failure and crash into the 52-week low around 48 and implied volatility remains high such that a bullish assumption play would be productive (e.g., short puts, Jade Lizard, etc.).
Although there are some other single names that are "ripe" for a volatility contraction play right here (TSLA (earnings in 31) comes to mind), my general tendency is to resist the urge to put plays on in single name with earnings announcements that are near the monthly and instead wait until the eve of the announcement. With a rank of 99 and implied of >100%, though, it's understandably tough to sit on one's hands and wait.
On the Exchange-Trade Fund Front:
Brazil is voting today, so it's likely that you're too late to get into a volatility contraction play that may evolve after the results are finalized (the time to have put that play on was last week). That being said, it's also possible that EWZ gets even more volatile depending on the outcome, even though implied volatility is at the top of its 52-week range at 56.2%.
The financial media has returned to covering 10-year T note yield hand-wringing and/or the spiking of bond yields in general as a general, explanatory theme of why the broad market gave some up last week. TLT broke through long-term support at 116 last week, cratering to 113. I was previously shorting TLT from the 122 level via put diagonals, but it appears that play may have temporarily played out in the absence of some risk-off event that drives treasuries back up. I will continue to short TLT on retrace, but there is little that sticks out to me in terms of horizontal resistance other than 122 and 116, and I'm hesitant to short from 116, since it literally just broke that level "seconds ago" in the scheme of things.
The little engine that could.... Of course, there are many levels to breach before this secular trend can be declared to have turned. Nothing conclusive therefore.
To me however, the momentum appears to be positive.
If indeed my analysis should come to pass as outlined, many a peripheral countries should find themselves gradually, though rather quickly, further up the proverbial creek.
THE WEEK AHEAD: NFLX, EBAY, IBM, XOP, EWZ, TLT/TBTWe're back into the thick of earnings season again ... .
NFLX (rank 64/implied 52) pops the top on Monday after market close, so you're going to want to slap anything you want to do on before session end to take maximum advantage of a volatility contraction play.
Pictured here is a 20 delta iron condor in the weekly with a buying power effect of 6.59 per contract, and a max of 3.41 (a smidge greater than one-third the width of the wings). Naturally, you'll have to adjust the strikes shortly before fill, since it's a mover. Look to take profit at 50% max ... .
EBAY hits the bricks on Wednesday after market close. I'd rather have background implied at >50% (it's currently at ~33%), but it may be worth watching to see if it ramps up in the Monday through Wednesday sessions.
IBM gets its party on on Wednesday after market close, too, but that background implied of 25% doesn't exactly get my motor running.
On the exchange-traded fund front, there isn't much premium to be had, and what there is to be taken is to be found in the places where it's been over the past several weeks: Brazil (EWZ -- 33.5% background), and petro (XOP/OIH -- 30%). Me personally, I'm hand sitting on those until I can see the whites of September's eyes (it's still 68 days out). That being said, if you're willing to go a little more long-dated here: the XOP Sept 21st 43 short straddle is paying 4.36 with break evens at 38.64/47.36, theta of 3.12, and -7.82 delta; the EWZ Sept 21st 34 short straddle: 4.06 credit, 29.94/38.06 break evens, 2.9 theta, -6.74 delta.
Other "Major Food Group" Directionals: TLT continues to bop annoyingly along horizontal support/resistance near 122.50 like a toddler kicking the back of your seat in economy class. My tendency has been to short on retrace in a tightening rate environment, with the preference being for more flexible, longer-dated setups like diagonals where I've got time to reduce cost basis, as opposed to using static one-off spreads where you could find yourself in the middle of a short-term risk off event that ruins your day.
Inversely, TBT is holding on by its fingernails to 35.25. I could see pulling the trigger on either here -- a long-dated TLT downward put diagonal or covered short combo/a TBT upward call diagonal/covered long combo. (See TBT Upward Call Diagonal Post, below).
OPENING: TBT AUG/SEPT 37/33 UPWARD CALL DIAGONAL... for a 2.62/contract debit.
Metrics:
Max Profit on Setup: $138/contract
Max Loss on Setup: $262/contract
Break Even: 35.62 vs. 35.69 spot
Debit Paid/Spread Width Ratio: 65.5%
Notes: Basically, shorting treasury strength with the inverse instrument ... . Here, I'll look to take profit somewhat quickly, since I've only got one roll opportunity with this setup. I ordinarily like to do these as skip months (e.g., August/October) to give me more time to be right and more roll opportunities, but there is no October expiry available yet. You can naturally look at doing a similar downward put diagonal in TLT.
THE WEEK AHEAD: EWZ, EWW, CPB, BOXThis week: three candidates for directionals and one nondirectional premium selling play ... .
CPB:
Although timing could have been better to catch the absolute bottom in this, implied volatility rank and background implied volatility remain quite high in this underlying (61/35). Given price weakness coupled with high implied volatility rank, I would think that a bullish assumption directional would be the way to go, with the most straightforward strategy being via short put. Pictured here is a "Wheel of Fortune," at-the-money short put that's paying 1.85 at the mid with a break even of 36.15. The basic strategy is to take the short put all the way to expiry and, if assigned, proceed to cover at or above your cost basis and work it as you would any covered call. Naturally, if price finishes above 38, you walk away with the entire premium.
Variations: 30 delta short put: Aug 17th 36, 1.05 credit at the mid, 34.95 break even.
EWZ:
The Brazil exchange-traded fund has absolutely been crushed, with price within 5% of its 52-week low. With a rank of 50 and background at 35, here's another play where you've got weakness coupled with volatility, so a bullish assumption play makes the most sense.
The Aug 17th 32 "Wheel of Fortune" pays 1.65 with a break even of 30.35; the Aug 17th 30 delta short at the 30 strike, .87 with a break even of 29.13.
EWW:
If you're already in Brazil, EWW (rank 65/implied 27) is also at the bottom of a fairly long term range between 43 and 56. Wheel of Fortune: Aug 17th 46 short put: 1.75 at the mid, 44.25 break even; 30-delta: Aug 17th 44, .98 credit, break even at 43.02.
BOX:
With earnings 25 days in the rear view mirror and high rank and implied (76/53), I'd probably opt for a Plain Jane nondirectional: the Aug 17th 24/32 is paying 1.78 with a 69% probability of profit, break evens at 22.22/33.78 (wide of the expected on both sides), delta of .72, and theta of 3.34. Defined risk variation: Aug 17th 22/25/31/34 iron condor is paying 1.26 (I had to bring in both sides a smidge because the highest strike in Aug expiry is currently at 34 ... ).
OTHER ACTIVE ALERTS:
TLT, short on retrace at 122 (downward skip month put diagonal; horizontal resistance) or TBT, long on retrace at 36 (upward skip month call diagonal; horizontal support).
XOP, short on retrace at 44.50 (downward skip month put diagonal; top of range).
Cup-&-Handle in the TBT- Interest Rates Going Higher, Tax Probs?Hold tight for this ride, there's a variety of reasons why bond prices will stagnate or fall.
Interest rates should rise and be higher than they are now; "should" certainly isn't a reason for something to happen, but there are scant monetary policy maneuverings available for the Fed to keep interest rates low and by extension, prop the stock market up much longer.
The TBT - ProShares' 2x Short 20+ Year Treasury Bond ETF - is an exchange-traded fund that seeks to double the inverse of the U.S. Treasury Bond index on the daily. When bonds do poorly from falling prices and/or higher yields, TBT rises and seeks to double the fall of long-term treasuries.
There's a lot of reasons treasury bonds don't look so hot in the foreseeable future.
Let's first be honest about the state of the economy - it's not doing as well as the Fed and economic experts might lead us to believe.
1. Data continues to show GDP is not as strong as predicted.
GDP estimates are coming out crazy high. It's alarming to watch as the real numbers are revised lower and lower.
2. Input costs of all types are rising.
Trade concerns and commodity shortages are leading to higher input costs in sectors across the board.
3. Unemployment numbers don't reflect reality.
The unemployment numbers themselves might be valid, but the way they are calculated today is misleading. Experts claim that unemployment for college degree holders is below 2%. If the assessment is based on simply whether or not degree holders have a job, that might be true - but the numbers are false with regard to the reality of America's employment situation; an engineering graduate who is cooking pizzas for $8.50 an hour might have a job, but their pay grade is a fraction of what it would be if they could find employment in their field. Record-low unemployment numbers are no good when it means law school graduates are working as office receptionists and scientists are waiting tables, etc., and that's a more prevalent situation than what experts might lead us to believe.
4. The tax cuts aren't - and won't - help the middle- and working class as intended.
The stated goals of Trump's tax cuts were to repatriate offshore money and bring corporate tax rates to competitive levels with countries like China. Those goals may be becoming realized, but the end result is not beneficial for the little guys. We've heard feel-good stories of employers tossing out $1,000 bonuses to employees, etc., but the reality is companies are using the favorable tax situation for stock buyback and M&A (merger and acquisitions) - and as a whole that benefits people at the top much more than professionals in the middle or workers at the bottom.
So, the overarching situation is this: tax cuts aren't helping the everyday worker as much as experts might expect, and workers may be finding employment but they are underemployed and underpaid.
Bottom line? Lower tax receipts with unfettered government spending will mean the U.S. Treasury will need to issue bonds.
Bond prices will flounder and yields will rise - just as the Fed will presumably need to start printing money (QE 4?) - begging a couple questions:
How are bondholders going to get paid?
How is the strength of the dollar going to be maintained?
Simply put, there are fundamental reasons for the price of the TBT ETF to climb higher. Similarly, there are technical reasons for the TBT to rise too - a cup-and-handle has printed in TBT's chart. This indicates higher prices in the future.
A TBT trade is a little more involved than most, but could pay off with big returns on investment as the story plays out.
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Thanks again!
See it on the site: holsturr.com/category/markets/charts/
** For speculative and research purposes - good luck! **
Major top?TLT treasury bonds are at a huge support, potentially forming a massive top... A break below the neckline would possibly have huge bearish implications.
US 30 Year Bond is testing it's daily uptrend line and supportI posted this as neutral because it can go either way from here. I shorted the future 2 days ago but did not buy TMV in my 401k.
For those who are short, this is a take profit area if support holds. I will put a tight stop loss here. A long position can be taken here depending on the price action. If it breaks support and the uptrend line, short at an appropriate time. usb30yusd usually falls with dxy strength.
