Long PMs & Short Bonds Update: TBT put sales now up + 30-40% as
10 yr. breaks 4% (18 month high) and 3 & 6 Month T-Bill
auctions weakest year to date...
A few interesting articles today on shorting Treasuries:
Weakest 3 And 6 Month Auctions In 2010, Major Direct Bidder
Presence Once Again
zerohedge.com
10 Year Breaks 4% - Highest Yield Since June 2009
zerohedge.com
End of 30-Year Bull Market in Bonds
minyanville.com
And from last week:
Greenspan Warns of Rising Interest Rates
totalmortgage.com
Fed to stop buying from Fannie, Freddie
marketplace.publicradio.org
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With the Fed promising Congress that it would no longer
use quantitative easing to monetize U.S. Treasury purchases,
and with them arriving at the end of their Fannie & Freddie
mortgage backed securities purchases; I thought this looked
like a great risk:reward entry trade, and so far, so good...
From SliderOnTheBlack 3/3/2010 1:45:20 PM
Message 26359425
"We all know the Fed is nearing the end of it's prop job
of buying up Fannie & Freddie paper. And we all know that
the US has one helluva lot of US Treasury paper to sell
into an environment where virtually every nation on earth
has internal economic problems, if not it's own brewing
sovereign debt crisis.
Many traders are looking at rising interest rates and
shorting US Treasuries as the coming "trade of the decade."
I'll get further into the "trade of the decade" part of
that thesis at a later date, but what I want to talk about
today is yet another "put sale" opp into a very compelling
risk:reward environment.
While the premiums on the strike prices I like aren't into
the 25-30% bet the farm range, there's some decent premiums
at strikes where you're getting paid decent money to buy
TBT at a re-test of it's all time lows.
You can get a fat $9.35 premium for selling the $50 strike
on the Jan 2012 LEAP puts.
(You can close this out today for $7.15 for a +31% pop)
finance.yahoo.com
Would you be a buyer of TBT at 40?
Or, you can get paid $2.18 to $6.00 for selling the $35,
$40, or $45 strikes on the 2012 TBT puts.
(You can close out the $35 strike today for $1.52, a +43% gain)
Would you be a buyer of TBT at 36, at 33?
Of course you would.
But wait - there's more!
Here's the kicker...
Remember what the Black Swan recommended in that video
I posted a few weeks ago from the 2010 Russian Summit?
Message 26307281
Taleb said that you should take a very small portion of your
portfolio and make a deep, deep, max out of the money bet on
shorting treasuries. And buying out of the money LEAP calls
on TBT is a great way to make that bet.
But I want to take Taleb's trade and make it even better...
-- I want to make it an ever stronger risk:reward trade.
-- I want to put a big wad of cash in your pocket today,
via getting paid for being a willing buyer of TBT if it
should ever re-test it's all time lows.
-- And I want you to use just a small fraction of those
put sale premiums to fund your "Black Swan" trade.
Once again here's the trade...
1. Sell the $35 to $50 strikes in the 2012 LEAP puts on TBT.
2. Take a small portion of the premiums you're going to receive
and buy some deep out of the money 2012 LEAP calls on TBT.
3. Bank the bulk of the cash and sit on it as insurance for
buying in TBT if it should re-test it's all time lows.
I'm thinking we have a damn good shot on collecting on both
ends of the trade... banking the premiums, and collecting
on the calls."
------------
I'm tasting the Kobe beef already on the TBT trades...
So far so good, with 30-40%+ gains to date on the put sales,
and the calls are smokin' with the 2012 $50 LEAP Calls up +14%
today alone...
finance.yahoo.com
TBT Jan 2012 50.000 call
(OPR: YHT120121C00050000)
Last Trade: 9.00
Trade Time: 3:59PM ET
Change: Up 1.10 (+13.92%)
As far as gold and PM's...
I thought PM stocks were over-sold to the metals on the
January correction and was looking for a HUI 377ish bottom,
selling out of the money puts targeting HUI 336ish, and
buying some March to May calls.
Message 26290437
We were close enough for hand grenades, horseshoes and darts,
as the HUI only closed below 377 on just two trading days
(with the intra-day highs both days hitting 390), with an
ultimate closing low of HUI 369 on February 4th.
The PM indices have bounced 17% off the lows, with March-
May calls up 3-4-5 x that.
The GDX April $50 calls were up +33% today alone...
finance.yahoo.com
GDX Apr 2010 50.000 call
(OPR: GDX100417C00050000)
Last Trade: 0.20
Trade Time: 3:59pm ET
Change: Up 0.05 (33.33%)
And the NEM April $55 Calls were up +29% today.
finance.yahoo.com
NEM Apr 2010 55.000 call
(OPR: NEM100417C00055000)
Last Trade: 0.71
Trade Time: 3:59pm ET
Change: Up 0.16 (29.09%)
The HUI gold bugs index continues to track the China FXI.
Given the still terrible underlying fundamentals in the
US & European economies, it should be clear to everyone
by now——that with a mechanically strong (best of the worse)
US Dollar, it's the China story that's keeping the bull
market market and commodity markets propped up.
The HUI did lag the FXI a bit in late March, but is now
filling that gap on this rally:
Both PM & Chinese stocks are driven by hot, speculative money,
and that's why the HUI & GDX are tracking the FXI so closely.
For now, it's the indicator to watch. No reason to dump
gold stocks, as long as the hot, spec money stays long
and strong China.
(Whether China is real, or a bubble is another story)
And for those who want to know why Oil is soaring into
weak demand and a terrible underlying global economy,
here's why....
"The Bow," from April 2, 2009
The Bow (and the deal) that sent oil prices soaring.
"We'll get Wall Street to run up oil prices, but you must
recycle those dollars back into US Treasuries."
SOTB
PS: Catherine Austin Fitts dropped some bombshells
on the Alex Jones show today... I'll try to get my
thoughts on what she had to say, up later tonight.
Buckle Up America, because you won't be calling
it a "conspiracy theory" much longer. |
