iShares 20+ Year Treasury Bond ETF
TLT did not agree with this move, I would be VERY surprised if there is no profit taking tomorrow. Definitely, Jpow was dovish, but only in tone, nothing new was really said today IMO. Completely agree with you, and almost all bear downtrends begin with a massive blow off top.
I got some TLT calls and TMF this week and I was pissed all day because it was the only thing on my watchlist not mooning. At least it's picking up the slack now. In theory TLT should be more of a pure play on rate hike expectations while getting a boost from recession expectations, which is why I didn't go full tilt on SPY.
Core PCE will be close to zero. PCE weights shelter and used cars much less than CPI. So a rough estimate of the core PCE is the CPI less shelter, energy, food, and used cars and trucks, which is one of the categories that's broken down in the full CPI report. I went back for two years and core PCE is almost always below that number (MoM) or at most 0.1 above it. That number for October was dead-ass 0. Headline PCE also weighs energy and food less than CPI. My estimate for headline is about 0.2 MoM. Core YoY will have a 4 handle guaranteed. I'm holding my calls on TLT, SPY, and QQQ and expecting a good bump from it tomorrow morning especially since JPow re-confirmed core PCE is what they most care about. But I will be taking some profit on that bump because PCE doesn't normally move markets, so I think any euphoria will be short-lived, like with PPI.
I'm really just looking for the following from JPow this afternoon: 1. Mentions pain. 2. Mentions Volcker. 3. Clarifies that a pause in rate hikes would also mean an acceleration in balance sheet reductions. They mentioned this in March but the bond market seems to have forgotten it. ​ If I hit the trifecta, that gap from 375 to 384 (CPI release on 11/10 from 11/9's close) gets filled this week with Core PCE increasing on incredibly heavy volume. ​ Puts on SPY and TLT would hit big. ​ Roll most of the gains into DIA puts for the following week to bank on OPEC production cuts, increasing violence and visibility in China, and the railroad strike.
But you are bullish. Short term trade? Just curious. I had TLT calls as a hedge. Sold them a couple of weeks ago. Now my hedge is OTM short dated calls and UUP puts. Selling the UUP puts tomorrow. I got my double. Calls will be gone on any decent pump as well.
I'm debating how to play PCE. It comes out the same time as some jobs data. It's possible that lower inflation doesn't really lead to a rally in SPY if it seems the economy is crumbling. Thinking of buying some TLT calls to capture the pure inflation play without letting all this "recession" nonsense spoil the party.
I tested all indicators myself. They are all garbage. All of them. Your best bet is another source aka stock, commodity or etf to give you signals. I looked at TQQQ SQQQ the last weeks myself = hint try the TLT etf. Good luck.
I recommend selling the TLT $105 call at its current market value of $2.65. This trade would result in a loss of $3,150, or 7.92%. ^^WSB ^^[Stats](https://www.twitch.tv/wsbzjz/) ^^[**Discord**](http://discord.gg/wsbverse) ^^[BanBets](https://www.reddit.com/r/wallstreetbets/wiki/banbets/) ^^VoteBot ^^[FAQ](https://www.reddit.com/r/wallstreetbets/wiki/votebot/) ^^[Leaderboard](https://www.reddit.com/r/wallstreetbets/wiki/leaderboard/) ^^- ^^[**Keep_VM_Alive**](https://www.patreon.com/visualmod)
TLT is usually the simplest one for options, and some people like to hold investor grade corporate bonds. [Pimco's High Income Fund (PHK)](https://www.pimco.com/en-us/investments/closed-end-funds/high-income-fund) offers an 11% yield rn and has a nice mix of gov't & high yield credit. I used to hold it but I'm in Canada so I didn't like the withholding tax. Right now I'm just long TMF, and will be looking for TLT calls if it drops on JPow speaking (10:30 EST on 11/30)
Well, as the Fed hiked rapidly, existing bonds became unattractive because the new ones had a higher coupon rate. And holders of US treasuries (especially foreign ones) needed to scramble for USD to buy the new bonds. So bond ETFs went down as a result. Lots of pressure. Burry being short TLT also brought a lot of whale chasers out I imagine.
long bonds are less affected by FFR, but you could be right. Back in the 60s-80s look at FFR vs 30y bond. Sometimes Fed funds rate was twice the yield of the long bond. I think inflation and growth expectations are more important to TLT performance now vs FFR. QT could be an issue
Wealth gap engineering genius. FED knows they fucked up by spreading the wealth gap during Covid to “save” the economy. Now the money printer has become the money vacuum. I think they overtighten. That’s why I’m long bonds (mostly TLT, TMF), short stonks (as of last friday) and short oil.
Yeah - you buy both. JEPI is (essentially) a covered call strategy which works best for a side ways moving market. Whereas long term treasuries have been sold off (for a number of reasons) largely due to inflation. A recession will probably mean lower inflation and a "return to safety" so long dated treasury bonds will be attractive again. Personally, I have a $10 daily JEPI purchase and a daily TLT $7.50 purchase.
# Tickers of Interest - TL;DR **Gamma Max Cross** * [TLT](https://options.hardyrekshin.com/#TLT) 01/20 102P for $2.35 or less * [XLV](https://options.hardyrekshin.com/#XLV) 01/20 135P for $2.30 or less * [EQT](https://options.hardyrekshin.com/#EQT) 01/20 43P for $3.05 or less * [CRWD](https://options.hardyrekshin.com/#CRWD) 01/20 140P for $10.80 or less * [LUV](https://options.hardyrekshin.com/#LUV) 01/20 37.5P for $1.10 or less **Delta Neutral Cross** * [WBD](https://options.hardyrekshin.com/#WBD) 01/20 10P for $0.35 or less * [USO](https://options.hardyrekshin.com/#USO) 01/20 67C for $4.95 or less * [VOD](https://options.hardyrekshin.com/#VOD) 01/20 12C for $0.20 or less * [BEKE](https://options.hardyrekshin.com/#BEKE) 01/20 12.5P for $0.85 or less * [HSBC](https://options.hardyrekshin.com/#HSBC) 01/20 28P for $0.40 or less # Trading Thesis - Why These Crayons Taste Better Technical analysis and indicator based trading tend to use past price performance in order to predict important price levels today. This analysis is based on the current option open interest. With that option open interest, it calculates portfolio-level greeks--notably Delta and Gamma. More importantly, once the portfolio level greeks are established, I can now simulate the change in greeks at different price points. From there, I can find the price levels where portfolio-level gamma is the highest, and the portfolio-level delta is close to 0. For some tickers, the underlying price reacts strongly off of delta neutral, gamma max, and sometimes both. It's the reaction off of these price levels in the past that is being used to drive trading signals. The plays and target entry prices given are calculated using a binomial option pricing model that reflect the expected size and duration of the reaction from gamma max or delta neutral. A lot of these plays are profitable by underlying moves in stock. The best plays benefit from the directional move as well as the increase in IV. # Notes - Something to give you a new wrinkle * If the price has moved past the entry price, exercise caution. Something changed between the time these plays were generated and market open. * Look to sell half your position on a double, and freeroll the rest to exit at your discretion. * I tend to risk up to 1% of my total capital on any trades I take. If my conviction is lower, I'll only allocate 0.5% or even 0.25% of my capital to the trade, and dollar cost average in. * The trades were calculated before market open, and so are based on information up to yesterday. Keep that in mind when deciding to enter well after the fact. # FAQ - Because others have already asked. * These plays are mostly puts. Are you a gay bear? * No. It so happens that the companies have had some recent run-up which implies they are overextended. These trades are primarily some form of mean-reversion either toward or away from an important price level. * Are you entering all these plays? * No. There have been a dearth of plays in the WSB morning talks, and so I opened up my bag of tools slightly wider to point out more plays with a probable edge to help lead apes to more gain porn. Go through this curated list of plays, pick the ones you like based on whatever additional analysis you use, and get that gain porn. * You mentioned a new play on the same ticker in the past. What does that mean? * The new play should replace the old play. The old play is likely now invalid and if you haven't entered in, don't chase the price. Remember that a new day's worth of data has been produced and the newer play reflects that data, the older play does not. * Where are the crayons? I only see words. * Click the links above. * Have you back-tested this? * Yes. Results show a moderate Sharpe Ratio (1.7), with an expected win rate of 63% of trades (7% margin of error) * What is the historical performance? * The realized Sharpe Ratio is 1.85 with a 67% win rate. Based on the trade performance so far, there is a 95% chance the expected win rate will be between 49% and 72%. (Stats as of 2022-10-28)
31.25 per tick is exactly the kind of risk tolerance I am looking for lmao. Was trading \\sil last week but bond futures.... I don't know if I understand your logic "10s and 30s are the most sensitive to recession fears, so as a recession becomes more obvious they should keep going up, or at least not go down." I mean just look at what happened to TLT throughout 2022. By selling puts on \\ZN or \\ZB you are essentially making the bet that the yields are done mooning. But if the federal funds rate does find its way north of 5.5% in 2023, then AFAIK the 10/30 year yields might continue to rise, putting downward pressure on long term bonds.
First let me observe that TLT is not the same as the bond market. BND would be a better vehicle for representing the US bond market as whole. Good news and bad news: Good news is that there is a free historical correlation tool (see link below) that will do all the calculation for you and you can customize the time interval for comparison. Bad news is that it only takes stock and ETP symbols, not indexes, and the correlation history goes only as far as the youngest symbol, and the symbols for the currency and interest rate indexes are quite young, a couple of years or less. I had to use RATE as a proxy for TNX, and UUP as a proxy for DXY, which severely limits the look-back distance, but if you can find better proxies, you can just plug them into the same page. [SPY vs. BND vs. RATE vs. UUP correlations.](https://www.portfoliovisualizer.com/asset-correlations?s=y&symbols=SPY+BND+RATE+UUP&timePeriod=2&tradingDays=60&months=36)
I’ve been selling options in ZN (10yr) and ZB (30yr), as well as TLT (30yr etf). 10s and 30s are the most sensitive to recession fears, so as a recession becomes more obvious they should keep going up, or at least not go down. I’m also short 2YY/long 10Y (micro interest rate futures) as a pair trade for when the yield curve un-inverts. That may take a while, and I expect I’ll have to roll those contracts a few times before making a nice profit. But eventually that yield curve is going to steepen. Idk your portfolio size, but be careful with the full-size bond futures like ZN and ZB! They are worth $31.25 per tick, and a thousand bucks per full point. ZN is cool because you can do spreads that are .25 points wide, or $250.
Not OP, or an expert, but my two cents Since VGIT is listed first (VGIT:UTWO), I believe that means if the price is going higher in OP's chart, then it favors VGIT, so VGIT would be better, according to OP. VGIT is the intermediate term one (5-10 year bonds), and UTWO is the short term one (2 years). So the chart is saying the intermediate term bonds are doing better than 2 year bonds. Also, look at TLT (the 20 year bond version) which is the even longer term bond ETF, or even the comparison (TLT:VGIT), and TLT is doing even better. You could also look at each one individually in a chart, and then look at the percentage gains the last few weeks, and see that TLT is doing even better than the others. On the larger note about where to park your money, it seems like yields are doing down, so all of the ETFs will go up (VGIT, UTWO, TLT, etc) if yields keep going down. Historically there is evidence for the yields to go down in these types of situations, so maybe it will work out, who knows. You probably already know this, but the downside of buying a Bond ETF, compared to a bond, is you can lose your principal if the ETF goes down in price. Its a risk. Right now its a risk I am taking in small doses since I believe long term TLT will go up, but its still a risk. here is a list of bond ETFs - https://etfdb.com/etfs/asset-class/bond/ and here is one sorted by category - https://www.thebalancemoney.com/bond-etfs-the-complete-updated-list-416949 There are a lot of options. Its hard to know which one to select. I tend to follow the big money, so I look for the ones that had large assets, or volume, or spikes in buying, so I just copy what the large institutions are doing.
This fund will continually buy new bonds as well once older bonds mature. In a way, it'll trade like TLT but comprised exclusively of 2 year notes. When it comes to bonds I prefer target date maturity ETFs. The fund gets liquidated upon maturity and you get your principal back. One example would be Blackrock iBonds series for treasury bonds: ticker IBT(D to H), lettered by maturity.
The Fed has made it clear they have the firepower to go until something breaks, and the tools to fix it. The key part that has been mentioned is that they'll only come to rescue the bond market, which in turn will put a bid under stocks, if only temporarily. I think it's criminal our generation doesn't appreciate bonds, as they'll provide a better return vs equities in 2023. Been pounding the table since \~10/20, and was fortunate enough to scoop TMF (3x leveraged TLT) at the absolute lows on 10/21 & 10/24 (I've got receipts). The first tranche was below $6.50, and the 2nd was at $6.25. All-time low is $6.15 and we're at $8.50+ in a month. 3x leverage SPX is up 20%, but bond gang is up 35% :)
Couldn’t agree more about this being a tough week. Like you were saying the only trades I made money on were some short options. My humble suggestion is that you should stop trading Tesla. On a risk-adjusted basis, it just doesn’t seem worth it to contend with that kind of unpredictability. Since you already quit Apple, and you’d only be TA’ing the S+P and VIX if you quit Tesla, I’d like to suggest you give some love to the bond market. Bonds are sexy again for the first time in years. And they’re highly correlated to all the macro stuff that everyone cares about these days, like inflation, employment, and whatever the Fed is saying. They’re going to be a big part of the story in 2023, and there’s a boatload of money to be made in bonds depending on how you trade them (futures are very juicy, and the etfs have decent options markets too, especially TLT). The thing I like most is that whatever range they’re trading in actually makes sense, based on the most recent macro data and Fed speak. There’s a lot more randomness in stocks when it comes to price levels. As always thanks for the TA!
I am not buying SPY, I am buying GOOG which is currently trading at its lowest forward P/E in about a decade, and I am buying C which is trading at about .6 P/B. Their "bad" earnings from this most recent quarter are still absolutely massive. There is definitely overvalued shit in the market, which is why I am targeting my exposure towards things that benefit with rate changes like TLT, HYG, GOOG, C, SHEL, etc. SPY is not the only game in town.
The market has, for the most part, digested the current and future rate hikes from a risk free rate perspective. However, I do not believe it has fully digested it from an earnings/consumer spending perspective. 2023 earnings estimates still remain high or uncertain - this is why you see meme stock-like moves happen to $100B+ companies in 1 earnings report. So how do I invest? Just like the +Fed long everything move in 2021 is over, the -Fed short everything move in 2022 is over. Now is the time to separate the wheat from the chaff. Unfortunately, this will actually require analysts doing some due diligence on companies! In this short-term, poor companies with horrible balance sheets will continue to be held up by short position closures and algo-trading until the companies (or trading firms) finally disappear. Great companies with great [everything] will possibly be suppressed as unsophisticated/underwater investors throw the babies out with the bathwater. Now is the time to put your head down and go full Warren Buffett/Ted Weschler on the market. There is actually reward to be obtained in the coming cycle. I'm personally long TLT as the inflation narrative weakens and the Fed softens their stance. As for individual stock picks, I'm holding the few I like close to my chest, mainly because I haven't finished studying them completely to feel comfortable recommending them to anyone.
You want short term bonds to go up (rates down). If you were going to do it with etfs, you’d want to go long SHY/short IEF (SHY is the purest exposure to 2yr US T-notes). But, you’d need to lock up a shitload of cash to make any kind of decent gains, because a “big” move in a bond etf like SHY is only a fraction of a percent. There would also be fees for shorting IEF, on top of the fact that you would have pay the dividends to whoever loaned you the shares. So I really wouldn’t recommend it. If you want to play the spread, futures is the way to go. I recommend going to the CME Group website and learning about interest rate futures, and get a broker that lets you trade them if you don’t already have one. That said, if you’re not ready for that, you can’t really go wrong with just putting your money in any bond etf right now. TLT (20+ yr bonds) and IEF should have some nice gains over the next 6-12 months once everyone is convinced we’re in a recession. I’m in TLT and want to add more, but it just had a nice run so I’m waiting for it to cool off.
The volatility and yield risk exposure is directly related to duration of the fund. These are critical considerations in allocation decisions to most people. Investors seeking safe allocation will invest in low duration, high credit funds like SHY. Investors seeking exposure to interest rate risk factor will invest in high duration funds such as ZROZ, EDV, TLT. But they will be exposed to higher volatility and drawdowns.
Lookin out the next 2 years I'm thinkin TMF/TLT are smart plays. Currently have like 25-30% of my ports in them and will probably add on pullbacks. Look at tlt/20y bond vs spx performance during the last two yield curve inversions(2000/2007). Both times tlt would have done better than spx over the next 2 years