Hello Pezz, Early Morning Report:
According to KJC, I dodged a torpedo of a typhoon. I did not know because I was asleep soundly, behind my 8 mm thick window glass, snug in comforter, but still cooled by air-con.
Anyway, to the game:
I shorted a dollop of Lehman iShares 20+yr Treasury Bond (TLT) uk.finance.yahoo.com March 2004 strike price 80 Puts, because I believe I will not be putted the derived synthetic bond units at that price at a loss. I collected USD 3.30/unit of premium.
I figure:
(a) Derivative-panicked mortgage lenders severely sold their T-bill holdings as part of overall hedge adjustment, and caused over-reaction of T-bill pricing to the downside,
(b) The volatility is exaggerated, and temporary, because Al Greensputin is still in charge, however tenuous his reign,
(c) Max Pain iqauto.com (type ‘TLT’ and select March 2004 as expiration time) says USD 84 is the ‘right’ price for TLT by March of 2004,
(d) I am happy to hold a bit of the underlying 5.36% yielding TLT security if I must, and in exchange for that willingness, collect 4.13% of option premium,
(e) If I am wrong, and the TLT tanks more (T-bill rate rises more), then … well, I am guessing it will be because there is fear of high inflation, or tanking of USD, in which case the rest of my positions should do their day’s work, and
(g) Finally, I did the trade because I haven't a clue of what will happen.
Bring us back 10 years and it would be a bummer, less the Internet and all the easy access to wagering opportunities, not to mention exchanges of ideas ;0)
Chugs, Jay |
