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Conservative option strategies, what did you buy or sell today?
(02-22-2021, 04:05 PM)fenders53 Wrote:
(02-22-2021, 12:58 PM)vbin Wrote: Sold PFE, PCG puts, PLTR.

PEP covered call.

Have EPD, BP puts on order.

Bought a BP leap call.
This did not look like a good day at all to sell a PEP call.  Excuse my lecture but did we sell a put in a stock we are not cool with owning for awhile?  I was buying PEP shares today.  Ex div is soon so watch that price action.  It might make your call exercise a day or two before.
My PEP call is out to 03/19. Yes there is a possibility if it runs too much, It can get called. I won't miss it at this price.
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Hopefully PEP is sitting on support now. It will probably struggle in the mid 140s again. I already have a put I have rolled down numerous times. I am glad I sold at 148. I didn't expect a chance to get back in so much lower this fast though. It trades like KO and predictable enough. Without option premiums they underperform SPY.
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Anyone has a good hold on Bonds? Thinking to buy some TLT.
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(02-25-2021, 11:14 AM)vbin Wrote: Anyone has a good hold on Bonds? Thinking to buy some TLT.
Nooooooooooooooooooooooooooooo!!!!

Any questions?  Smile

Seriously though too early.  The risk reward is not there.  Not even close.  It's a falling knife as long as the 10YR rises every day.  I sold TLT puts most of last year.  I stopped a few months ago for a reason.  Next stimulus is damn near $2T.  We have finally found the line and the bond market reacted.  It will be a tall task for the FED to keep the 10yr under 2% for long, if they even desire to.  I will type a better description below shortly.
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Waiting for VIX3M to exceed VIX6M, then will buy TYD
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VBIN,

I'm sure you understand the basics of bonds. But you asked about TLT so let's discuss it. Movement in the price of a bond is the inverse of the yield. Pretty much stock price/div yield in reverse. Back in the day when safe bonds yielded 5 or 8%. it wasn't too significant if the daily interest rate moved 0.10%. Now it does and TLT action today illustrates it well. TLT is an ETF and they hold many thousands of individual bonds of course, with news bonds replacing bonds at maturity date. (they can trade them early but not important now)

Just today the 10YR treasury rate rose .13%. That is a 9.29% increase in yield in one day. That's a big daily move. The stock market didn't like it because it's been a trend.

Yesterday a share of TLT was $140.83.

Today T rates rose .13%, and yield is now 1.63% annual. It will gradually rise to prevailing yield. TLT share price dropped $2.30 to $138.63 because they hold bonds that don't yield todays higher rate.

So if you bought yesterday and rates freeze now (which they won't) Your yield while you hold it will rise to about 1.63% shortly to match current market rate. It's an index, it may take a few days or week to match perfectly as they flip bonds. The $2.30 TLT share price drop happens to be 1.63%. That's a coincidence it matched this exactly.

Bottomline is had you bought TLT yesterday you are instantly down the entire annual interest payout in only 24 HRS. I don't like that risk/reward AT ALL when the whole world expects rates to rise for awhile. Pull up a TLT chart. Had you bought just a couple months ago you would literally be down the equivalent of 5 years of bond dividends. You know you are going to dump that for a loss to free up capital. Selling puts won't save you from a constant grind up in rates. It works in reverse as well of course. All last year I was selling TLT puts and never got exercised. I and everyone else thought rates would not go up during a pandemic with an attentive FED. We were right. It was low $160s just last fall. That's a damn big drop if you held.

On a side note TLT can be a nice hedge. Recession comes, FED drops rates and TLT share prices rises while our stocks are getting hammered. Your yield will gradually drop but you were already paid for holding at the right time while rates were higher. It won't work nearly as well down here. 5%+ bond yields was a whole different game because they could drop rates 1% a quarter if they wanted too. Doesn't work now because we will be at zero quick. Don't ask me about negative interest rates. I've never lived it and don't want to pretend to know the crazy twists that could bring.

Going long any bonds other than ultra short term is damned risky while rates are rising. I just don't want to be in the hopeless position of being down 10% with a miniscule yield. Some wealthy folk that aren't informed won't be pleased when they see their next statement if this continues. This kind of stuff makes MO and T look real good. Might as well get 7% yield if you are going to risk a 10% loss of capital anyway.

Hope this was helpful.
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(02-25-2021, 06:17 PM)NilesMike Wrote: Waiting for VIX3M to exceed VIX6M, then will buy TYD
Sounds interesting Mike.  Care to share a few sentences about the entry exit plan?  This is a 3X leveraged bond fund VBIN so we have to read the owners manual carefully to play.   Big Grin
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Yes, very helpful. You bring up a good point on T and MO but I already have decent positions in them.


How fed will push interest rates down, they are already 0. Did you mean negative?
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(02-26-2021, 12:05 AM)vbin Wrote: Yes, very helpful. You bring up a good point on T and MO but I already have decent positions in them.


How fed will push interest rates down, they are already 0. Did you mean negative?
I'm not sure they could do much other than buy or sell bonds until the stimulus plays out.  I'm not a FED expert.   Every 6 months they break out a new trick I never knew was legal.
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(02-25-2021, 08:10 PM)fenders53 Wrote:
(02-25-2021, 06:17 PM)NilesMike Wrote: Waiting for VIX3M to exceed VIX6M, then will buy TYD
Sounds interesting Mike.  Care to share a few sentences about the entry exit plan?  This is a 3X leveraged bond fund VBIN so we have to read the owners manual carefully to play.   Big Grin

Entry is when 3M closes > 6M (backwardation). Buy TYD at the next open.

Exit is 25% gain in TYD, might miss the max but a good trade nonetheless.

When back in contango 6M>3M buy UPRO at the next open.

(for swing trades, I like to base them on VIX term structure, long term is DGI and day trades are ES at inflection points {hi/low of prior days-significant swing points} )
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