The Bond Bulletin by Carley Garner

[carleygarner]

The Bond Bulletin By Carley Garner

April 28th, 2009


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No signs of life


Seasonal tendencies and supply concerns have weighed heavily on Treasury trade in recent weeks; today's failed attempt at a rally seems to be glaring evidence that this continues to be the case. Better than expected news from the Conference Board in regards to consumer confidence and $35 billion in 5-year notes being auctions at higher than expected yields put immediate pressure on bonds and notes. What started as a moderately positive session, quickly turned into swiftly negative Treasuries. The 30-year bond suffered losses in excess of two handles from high to low.

The Treasuries efforts to manipulate interest rates via quantitative easing don't appear to have been hugely successful in the Treasury markets. However, it is important to realize that while the market hasn't reacted to the confirmation of the Fed's plan to purchase Treasuries, the rally that paved the way for prices to hover at such historically high (low yield) prices was founded on the possibility of government intervention in the marketplace. Conversely, mortgage rates have fallen to historical lows suggesting that the Fed's efforts have had some impact in peripheral markets.

Yesterday's session brought a dramatically stronger dollar, but currency markets spent today eliminating the premium built into the greenback. The lack of follow through buying likely helped to set the bearish tone in the long bond. Trade across the financial markets has become overly choppy and even more predictable than what it normally may be. Accordingly, we are inclined to take a few steps back and encourage traders to either be on the sidelines or involved with mitigated exposure.

The overnight rally nearly met our target for the 10-year note but fell short of our expectations for the 30-year bond. As a result, we are becoming uncomfortable with our previous recommendation to sell June Bond 118 puts and will be cautious going forward. While there is still plenty of room between the market and our strike price with only 24 days until expiration, this trade has strayed from our original intention of being a short-term venture looking to capitalize on a market bounce. Bounces have come and gone, but without the momentum that we had anticipated.

We see significant support in the 30-year near 123'04 and resistance at 125 and again near 126'19. Note traders should look for support near 121'03 with resistance at 122'22 (today's high). Intermediate resistance may be found near 122'09.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.



Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

April 17 - We recommended to sell the June Bond 118 puts near 20.

April 22 - Those of our clients that didn't get in on the original recommendation were able to get in today at better prices. Fills were coming in anywhere between 24 and 21.
• April 28 - Clients were advised to liquidate this position at a small loss prior to the FOMC announcement due to excessive event risk.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 1st, 2009

Register for our "Talk to Series" webinar with the New York Institute of Finance! Visit our websites for details.


Not so bad data weighs on Treasury futures


A continuation of the string of less than devastating economic data leaves bonds and notes under pressure. Contrary to the market's tendency to trade counter-trend going into the weekend, Treasuries started off the day in negative territory and remained there.

The University of Michigan's consumer sentiment index was reported at 65.1, much better than the consensus estimates of just under 62. As we all know, the consumer is the key to economic recovery...and if they feel better about their personal stability wallets may open up. More importantly to Treasury traders, they may look to move assets away from low yielding securities and back into more productive ventures. The ISM index also beat expectations, while factory orders were slightly worse than outlooks projected.

Also weighing on action is the overwhelming supply scheduled to be issued next week. However, the Fed has only used up about $75 billion of the possible $300 billion earmarked for Treasury buying. It seems as though they may be willing to step up their game in the near future in an attempt to keep mortgage interest rates low. The Fed sees low borrowing costs as the bloodline to the ailing housing market, and in turn a way out of this recession.

That said, the charts are telling us that there may be a little room for this market to move on the downside. We still believe that the 30-year bond will trade slightly below 120 and the 10-year note has a chance to see the mid-119's...at which point it should be an attractive buy. Likewise, we like the 5-year note near 116.

Have a great weekend!!

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.





Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 5th, 2009

Register for our "Talk to Series" option trading webinar hosted by the New York Institute of Finance and presented by DeCarley Trading! Visit our websites for details.


Treasuries are heavy, but bottom may be near


Light action and better than expected economic news kept bond and note futures under moderate pressure. While Treasuries spent most of the day in the red, the bearish conviction was weak. Accordingly, I sense that a bottom may be looming. That said, this is a market that is known for violent trend reversals and today's trade certainly wasn't violent. I suspect that we could see some sort of key-reversal low in the coming days that could extend to, or below 120 in the T-bond and the mid 119's in the T-note. Then again, this market has taken on some new characteristics and could be forming a rounding bottom as we speak (likely just to prove us wrong).

Market influences were mixed. The ISM manufacturing index was reported at 43.7, better than the prior reading of 40.8 and expectations for 42. Conversely, a relatively successful action of 1 and 3 year notes seemed to keep a floor under Treasury prices.

There is a lot of anticipation over the upcoming bank stress test results as well as Friday's employment data. Each of these events leaves risk of market exposure relatively high and makes trading in this arena much more difficult than what it would normally be.

We would love to sell puts beneath this market, and maybe go long futures in the 5-year note or synthetics in the 10-year but are patiently waiting for a lighter risk opportunity. If you want to play the upcoming event risk, we recommend playing it safe. In a perfect world, we would like to be long the June 5-year near 116 but if you are scared of missing the boat, you may look to purchase the futures near 117 and buy a June 117 put. This will give you 17 days in the market with limited risk and allow you the ability to peel one leg of the trade off at a time in either favorable or adverse market moves.

If you are interested in learning more about these types of trading strategies, join us on May 7th at 4:30 pm for a free online educational webinar. Register at New York Institute of Finance: Financial Training .


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.



Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045
• If you are uncomfortable with the possibility of a retest of the January highs, you can buy a June 99.00 call for about 13 tick to limit your risk on the trade to about $212 before transaction costs
• Keep in mind that this market isn't far from its all time high, if you are comfortable being short and are properly capitalized you may want to consider adding on if we see a sharp rally.





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 6th, 2009

Register for our "Talk to Series" option trading webinar hosted by the New York Institute of Finance and presented by DeCarley Trading! Visit our websites for details.


Auction reverses weak trade, but bears control


Treasuries were sluggish this morning following ADP's payroll report prediction. The payroll firm believes that non-farm job loss will come in under 500k. This would be a great improvement over last month's data and another sign that the economy may have dodged the depression bullet. With that said, ADP has yet to establish a reputation of being accurate.

Sharp short covering on light volume was triggered by a decent 10-year note auction. Also keeping bond and note bears with a slight edge is the continued equity market stability.

Meanwhile, leaks in regards to the stress test results seemed to keep a larger rally at bay. The new-found information takes some of the event risk out of tomorrow as there doesn't seem to be any "bombshells".

We are becoming increasingly bullish but believe that there is a risk of a large spike low across the Treasury complex. This could put the 30-year bond and the 10-year note near 120. The five year note could see 116 but looks to be nearing a buying opportunity in the mid-116's.

If you didn't take our original Eurodollar recommendation, good for you because you can do so at even better prices. Risk averse traders may even look to sell the futures near 99.11 and buy an at the money call for a limited risk of about $200 plus commissions. LIBOR is at an all-time high, it can go higher but it probably shouldn't.

We are sticking with yesterday's commentary in regards to playing this market to the upside:

We would love to sell puts beneath this market, and maybe go long futures in the 5-year note or synthetics in the 10-year but are patiently waiting for a lighter risk opportunity. If you want to play the upcoming event risk, we recommend playing it safe. In a perfect world, we would like to be long the June 5-year near 116 but if you are scared of missing the boat, you may look to purchase the futures near 117 and buy a June 117 put. This will give you 17 days in the market with limited risk and allow you the ability to peel one leg of the trade off at a time in either favorable or adverse market moves.

If you are interested in learning more about these types of trading strategies, join us on May 7th at 4:30 pm for a free online educational webinar. Register at New York Institute of Finance: Financial Training .




* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.

Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

Flat

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045
• If you are uncomfortable with the possibility of a retest of the January highs, you can buy a June 99.00 call for about 13 tick to limit your risk on the trade to about $212 before transaction costs
• Keep in mind that this market isn't far from its all time high, if you are comfortable being short and are properly capitalized you may want to consider adding on if we see a sharp rally.




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

May 11th, 2009

If you missed our online option trading class with the New York Institute of Finance (I know most of you had scheduling conflicts), you can view the archive for free by visting our website.


Treasuries Rally from oversold conditions


T-Bonds and notes found a much needed bid to pull the complex from oversold conditions. The Fed, and investors alike, went bargain hunting on the long end of the yield curve. The Fed purchased $3.51 billion in securities ranging from maturities of 17 to 30 years. Also helping yields creep lower is the fact that supply issues are out on the table and there shouldn't be any freshly issued government securities until the end of May. Perhaps the out of site out of mind mentality will pave the way for a recovery in the long bond to the 124 area in the 30-year bond and just under 122 in the 10-year note.

On the other hand, chatter among traders suggests that the S&P will have to continue to show weakness in order for Treasuries to resume their up move. Should stocks find another round of buying, bonds and notes may be in store for a retest of the lows; with that said we are leaning higher based on our near-term bearish stance in equities.

While the U.S. government has paused issues, corporations are still looking to raise cash. Microsoft alone is offering $2 billion in 5-years, $1 billion in 10-years and $750 million in 30-years. Other big fixed income sellers were Allstate and Anheuser-Busch.

Player volume continues to struggle and the lack of participation will most likely extend throughout the summer. In all honesty, bond and note volume in both options and futures really hasn't recovered from the excessive volatility last fall (for those of us trying to make a living through transaction costs it makes for a challenging environment) and this should make for an even quieter than normal summer session.

Last week we noted that bonds and notes were both a buy near 120; we hope that you took our advice!

Our clients were advised to sell the 117 T-Bond puts last week near 25 (some were filled a bit better and some a bit worse depending on their timing) and were recommended to buy them back today near 10 (fills ranged between 10 and 12). Assuming a fill of 25 and 12 the profit was about $200 per contract before commissions and fees. This type of trading won't necessarily make you rich overnight, but the idea is to hit base hits. If you are interested in this type of philosophy, stay tuned for our upcoming PFG webinar titled "Trade Like a Girl". I will keep you posted on the details!

**Our newsletters have attracted droves of followers and we appreciate the interest in our products. However, in an attempt to reduce the amount of piracy and plagiarism we will not be posting The Bond Bulletin as consistently as we have in the past. We urge you to register for a FREE e-subscription to the newsletter. The Bond Bulletin subscribers will conveniently receive the newsletter each day by email in a timely fashion and on a complimentary basis. We appreciate your understanding and look forward to providing you with market commentary.


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 7th - Sell the June 117 puts for 25 or better
• May 11 - This trade was exited near 10 to 12 ticks to take a quick profit

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045
• If you are uncomfortable with the possibility of a retest of the January highs, you can buy a June 99.00 call for about 13 tick to limit your risk on the trade to about $212 before transaction costs
• Keep in mind that this market isn't far from its all time high, if you are comfortable being short and are properly capitalized you may want to consider adding on if we see a sharp rally.





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 13th, 2009

If you missed our online option trading class with the New York Institute of Finance (I know most of you had scheduling conflicts), you can view the archive for free by visiting our website.


Supply, out of sight out of mind


The Fed has taken a break from the relentless issues of longer dated fixed-income securities and Treasury bears have taken the opportunity to lock in profits. Short covering has lifted bonds and notes from oversold levels but it will be left to the bulls to keep the momentum going.

We have been targeting 124 in the 30-year but it now seems like the market may run out of steam near 123'15ish. Notes on the other hand, have reached our expectations leaving us without much of an opinion as to the direction of trade in the next day or two. Continued weakness in equities could lead to follow through buying in the note to just above 123 but we wouldn't be willing to try to trade it. However, if we do see such levels it is likely that we will become bearish.

A possibly more likely scenario may be a reversal an or near current resistance levels and a possible retest of the lows. It seems to us that the stock market correction may have run its course (at least for now). We note heavy resistance near 877, assuming this level holds we could get an attempt at a retest of the equity index highs. In turn, weakness in across Treasuries may return.

Helping the market bid was a weaker than expected retail sales figure. Analysts were expecting sales to remain unchanged, but a draw of .4% sent value investors reeling on Wall Street and triggered a flight to quality bid in bonds and notes.

Sorry so short!

**Our newsletters have attracted droves of followers and we appreciate the interest in our products. However, in an attempt to reduce the amount of piracy and plagiarism we will not be posting The Bond Bulletin as consistently as we have in the past. We urge you to register for a FREE e-subscription to the newsletter. The Bond Bulletin subscribers will conveniently receive the newsletter each day by email in a timely fashion and on a complimentary basis. We appreciate your understanding and look forward to providing you with market commentary.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 7th - Sell the June 117 puts for 25 or better
• May 11 - This trade was exited near 10 to 12 ticks to take a quick profit


Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.


Flat


Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045
• If you are uncomfortable with the possibility of a retest of the January highs, you can buy a June 99.00 call for about 13 tick to limit your risk on the trade to about $212 before transaction costs
• Keep in mind that this market isn't far from its all time high, if you are comfortable being short and are properly capitalized you may want to consider adding on if we see a sharp rally.




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 18th, 2009

Carley's book is being featured on FXStreet.com, check it out!


Feb buying goes unnoticed


The Federal Reserve stepped in to buy Treasuries in the 10 to 23 year range totaling about $3.18 billion but traders were focused on stocks. The Fed is expected to be back on the "buy side" on Wednesday and Thursday. While this may not be enough to turn the tide, it could keep a floor under pricing. Keep in mind that much of the recent short covering rally (resulting in sharply lower yields) is said to be attributed to anticipation that the Fed would increase the pace at which it is acquiring its own securities, but failure for this to materialize has eliminated the bullish sentiment.

The selling pressure came on light volume, but you had probably already assumed this. It is highly likely that traders will extend the already long Memorial Day weekend into a mini-vacation. The major news event slated for this week appears to be the release of the FOMC minutes on Wednesday afternoon. My guess is that come Thursday, there will be even less volume flowing through the Treasury markets.

The theory that housing stability is necessary for an economic recovery has kept housing data in the spotlight. Today the U.S. Department of Commerce announced that building permits and housing starts were in line with, or better than analyst estimates and better yet have made moderate improvements from last month. In similar news, the NAHB (National Association of Home Builders) Index portrayed a slight increase in homebuilder sentiment. The index moved from 14 in May to 16 in April.

As mentioned in Friday's report, we are leaning lower in Treasuries and looking for an eventual retest of the recent lows and possibly slightly beyond. We think that the T-bond could see 119'08 and maybe even the mid'118's before finding buyers. Note traders should look for support near 119'11 and again at 119. The first area of support for the 5-year note futures looks to be near 116'21 with 116'01 being significant support.






Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 7th - Sell the June 117 puts for 25 or better
• May 11 - This trade was exited near 10 to 12 ticks to take a quick profit

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

April 30 - Our clients were recommended to sell the June Eurodollar near 98.045
• If you are uncomfortable with the possibility of a retest of the January highs, you can buy a June 99.00 call for about 13 tick to limit your risk on the trade to about $212 before transaction costs
• Keep in mind that this market isn't far from its all time high, if you are comfortable being short and are properly capitalized you may want to consider adding on if we see a sharp rally.






There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 21st, 2009


Fed disappoints bond bulls


Yields across the curve spiked higher today as the Federal Reserve failed to live up to expectations. Traders were buying in anticipation, and with confirmation, of more aggressive Treasury buying by the Fed, but the market was disappointed in the lack of action taken. As has been the case since the beginning of quantitative easing talk, the Fed's bark is bigger than the bite. The Fed bought $7.4 billion of the days $45 billion offered. Along with the Fed's timid buying, the government announced that it would sell a massive amount of new debt next week.

Bond and note selling was undoubtedly exaggerated by stop running and technical selling in light volume trade. Keep in mind that many traders are in a hurry to get on with the holiday weekend...and position squaring was full speed ahead.

Also keeping pressure on Treasuries is the struggling U.S. greenback. Notes and bonds have been somewhat correlated with the dollar. Today's plunge below 81 in the June dollar index is seen as a deterrent to foreign investment in U.S. securities and may even lead to the eventual withdrawal of some overseas investors. However, we believe that the dollar may be finding a near-term low in the 80 area...but can't rule out a probe to 78. If this is accurate, we should see similar trade in Treasuries.

We see support in the 30-year bond near 120, but more meaningful support and a likely target just under 119. Likewise, the note may travel to the 119 area but we think that support at such levels will hold in the near term. If you are trading the 5-year note, the mid-115's offer heavy support.

Our clients were selling puts this morning against the downturn. They were recommended to sell the July 112 puts for 25 ticks. Fills were ranging from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.




Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat






There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 22nd, 2009


Turn-around Tuesday?


Treasuries sunk ahead of the holiday weekend as the "big guns" began running for the doors after Wednesday's FOMC release. Bond and note volume was surprisingly healthy, but it seems to have been largely stop running as opposed to fresh short positions.

Aside from chatter of a downgraded credit rating for the U.S., there was very little to trade on and even less for me to write about.

Healthy stocks and a weak dollar both worked against Treasuries, but I am wondering if this will last going into next week. The U.S. dollar index seems to have extended itself a bit too far, too fast. While the mid 78's are possible, a strong rebound appears to be brewing. Assuming this is the case, we could see bonds and notes follow suit. That said, we are leaning slightly higher in equities which may work against the magnitude of any potential bond rally.

We can't rule out another sell-off to bring the June bond to the mid-118's but are looking for the 30-year to see 122'05 again in the near-term. Accordingly, we had recommended to sell the July 112 puts yesterday for 25. Clearly, those entering today would have gotten a better price but what can we say, we aren't perfect. Nonetheless, it seems like the odds favor an opportunity to buy the option back at a profit at some point next week.

We noted that the 10-year note may travel to 119, and it did. However, we are bullish from such levels going forward. The 5-year note, on the other hand, may have room to move on the downside. We wouldn't be surprised to see trade slightly below 116 but turn bullish in the mid to low 116's.
Sorry so short, enjoy the long weekend!






Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

May 29th, 2009

Carley's book is being featured on FXStreet.com, check it out!

Must subscribe on our website for FREE daily access to this report.


First they sour, then they soar!


It has been an eventful week in bond land and traders were more than ready for the weekend. After several panic trading sessions in interest rates, Treasuries firmed up nicely to end the week. The buying was likely a combination of short covering as traders squared their positions for the week, a realization that the market had gotten ahead of itself and investors finding comparatively attractive yields in Treasuries once again.

Economic data was mixed, but the fact that it wasn't highly bearish was cause for a relief rally. Gross domestic product were slightly bond friendly coming in at a worse than expected -5.7%. The University of Michigan consumer sentiment index was reported at 68.7, nearly in line with optimistic expectations. The Chicago PMI seemed to give bonds and notes the biggest boost after being reported at 34.9; a far cry from the previous 40.1 and the expected 42.

Next week will be even more action packed and the markets should put on a good show to conclude the week with the monthly employment report. Analysts are expecting another draw of over 500,000 jobs. While these types of numbers were shocking a few years ago, it has become commonplace.

Now that Treasuries have turned the corner and we can finally think a little clearer, it looks as though the long bond is well on its way to 119'20 in the September contract at which point be become neutral. If you are still trading June, this translates into 120'30 but you should be rolling into the next contract month (today was the first notice day).

If you are trading the notes, we are looking for the September 10-year to see prices slightly in excess of 118 before short covering has run its course. The September 5-year note should see 116ish again soon.

We have adjusted the infamous short puts gone bad, see below recommendation for an update. Once again, if you would like to learn more about using options to hedge, short option trading or aggressive spread trading...pick up a copy of my book "Commodity Options"; it is available in all major book stores. Sorry for the shameless plug, but I really think that traders owe it to themselves to explore all of the possibilities in speculating and this book was written to open your eyes to alternative approaches to the markets.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

June 3rd, 2009


Treasury bottom or false hope?

Treasury bonds and notes managed to thwart another wave of selling, but many are wondering whether it will last. If you ask us...we think that the sharp reversal in currencies, metals and other commodities suggests that it could. Once again, we can't rule out another retest of the lows...or the fact that we may be wrong, but things seem to be looking up for Treasuries.

The Fed bought $7.5 billion in Treasuries today but that likely wasn't the source of the buying; Bernanke didn't give any indication that the Fed's purchase were going to increase in size or frequency. In fact, the Fed chair did warn that rising U.S. debt is contributing to a spike in longer-term interest rates and it is necessary for congress to begin working on a plan to drastically reduce spending.

It seemed as though the day's gains were primarily the result of short covering triggered by lower equities and a decent ADP prediction; this was despite a slightly disappointing ISM Services figure. Whether the oversold bounce will continue seems highly dependent on whether the stock market and commodity correction extends itself.

For now we are cautiously looking for about 118'25 in the 30-year bond and perhaps 118 in the 10-year note. Assuming that our assumptions are correct, we could see 115'20ish in the 5-year note in the coming sessions.

Keep in mind while our bias is upward, there are several news events going into the weekend that could complicate things. Don't get overly bullish!



**Seasonality is already be factored into current prices, any references to such does not indicate future market action.





Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

June 9th, 2009

Visit our websites to register for our upcoming FREE online seminar, Trade Like a Girl: How to Deleverage your Trading with Synthetic Options and Common Sense

Quiet trade despite auction

In the past I have always viewed the Treasury markets as being somewhat rational relative to the other financial markets. However, in the last 9 to 12 months I have retracted that opinion. As it turns out, Treasury traders are just as prone to panic as any other; we saw it on the way up in late 2008 and again on the way down in the most recent months. Accordingly, I have become increasingly suspect in regards to the directionless trade witnessed in the previous few sessions. With near chaos in the currency and commodity markets I can't help but feel the tension in bond trade building.

The 3-year note auction went better than expected but the market's reaction was highly reserved. Contracts representing the short end of the curve caught a bit of a bid but the long bond gave up the day's gains on the news. Apparently the news wasn't good enough. Most traders looked at today's auction as a speed bump in the road to get to the reopened 10's and 30's set to be issued tomorrow and the next day. Volume has tapered in recent days but could pick up again in light of the upcoming auctions.

Looking at Treasuries on a long-term basis, we are approaching a seasonal low and massive numbers of short traders will eventually fuel a short covering rally that could be surprisingly sharp. However, the trend is clearly down and the market has yet to find a catalyst to squeeze the bears enough to deter a sell on rallies mentality. This makes for a tough climate to be a directional trader.

We are looking for support in the 30-year bond near 112'07 then again at 111'20. The 10-year note should hold above 112'18 even in the case of an auction gone bad.






**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat



*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

June 10th, 2009

Visit our websites to register for our upcoming FREE online seminar, Trade Like a Girl: How to Deleverage your Trading with Synthetic Options and Common Sense


Oversold, but doesn't matter


The highly anticipated reopening of $19 billion in 10-year notes went off at a pricey 3.99% and a 2.62 bid to cover. Bond and notes were heavily offered on the news putting each of the futures contracts at levels not seen since November of last year. The markets will be tested again tomorrow with the reopening of $11 billion in 30-year bonds which hasn't had strong showings in the previous two occasions.

Traders note that even in the midst of quick price action, the trading volume isn't impressive. However, that may change in the coming sessions and investors will be tempted to put money to work in Treasuries. The 4% mark on the benchmark 10-year note has been a key pivot point throughout the most recent twelve months and we don't expect things to be any different now. At some point (maybe not today or tomorrow, but soon) investors will begin to notice the value that Treasuries offer. While 4% isn't a "gravy train" it isn't bad and it is nearly guaranteed.

It was pointed out to me that the Fed no longer refers to its Treasury buying program as "quantitative easing". Most likely because they have come to the realization that it would be dangerously expensive to purchase enough of their own securities to actually cap yields. Nonetheless, they are at least making the bears think twice about getting too comfortable.

The buck has managed to keep most of the gains forged last week, but Treasury traders have yet to respond. Chatter of the Chinese pulling out of the dollar, and more importantly dollar backed assets, have prevented correlation between bonds and the greenback. If the U.S. dollar index breaks through resistance near 80.55, the June futures could be on their way to 83. If this is the case, bonds and notes should find a floor.

For those of you with the short T-Bond puts, that turned into a strangle...and has undergone many adjustments in between; we are looking to roll the 112 puts into the 110 puts in order to put the trade into a nearly delta neutral position going into the auctions today and tomorrow. We paid 41 ticks to do it, but have managed to collect enough premium around the primary position to keep the overall trade as a nice credit...now we just have to keep it.

This turned out to be a much more intensive trade than we anticipated and has undergone many different faces in order to salvage time value and allow for profitability. It seems as though barring any large volatility moves, this may be the final necessary adjustment and after what seems like an eternity of sleepless nights, the trade seems to be in a position to actually be profitable. Let's see if the market will cooperate.

Also, I realize that many of you have alternatives to the positions that we do (as displayed below) if you have any questions or need ideas, I am here for you.

We are looking for support in the 30-year bond near 112'07 then again at 111'20. The 10-year note should hold above 112'18 even in the case of an auction gone bad.



**Seasonality is already be factored into current prices, any references to such does not indicate future market action.



Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)
• June 10 - We rolled the July 10 puts from the 112 puts to widen the strangle, we gave up about 41 ticks in premium to do it.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[gooseman]

preference long or short vega in 10's?

 

[carleygarner]

preference long or short vega in 10's?

Short Vega...but trying to maintain a neutral, or reasonable delta (tough market to do this in at the moment)

 

[carleygarner]

The Bond Bulletin By Carley Garner

June 12th, 2009

Visit our websites to register for our upcoming FREE online seminar, Trade Like a Girl: How to Deleverage your Trading with Synthetic Options and Common Sense


Light volume and WSJ article aid correction


An article reported in the Wall Street Journal claims that the Fed plans to keep rates low by whatever means, although it has been observed that they are reluctant to make the current program more aggressive. Nonetheless, a week of bond bashing and position squaring ahead of the weekend was reason enough for traders to be on the buy side.

The University of Michigan's consumer sentiment index was reported at a solid, but less than expected, 69. If you recall, the previous reading of 68.7 was a market-moving event sending stocks higher and bonds lower.

The U.S. dollar index forged a rally but has failed to break out of its consolidation range; luckily, I am not attempting to trade currencies... However, there has been a correlated relationship between bonds and the dollar. A close above 80.70 in the September dollar index indicates to me that bonds and notes could move higher along with the currency.

Traders are looking forward to next week's inflation data as it will play a substantial role in the direction of Treasuries from here. The foreword looking markets have already begun pricing in the potential inflation consequences of the Feds spending spree despite the fact that prices pressures have yet to show up in the data. Perhaps, the market will retract some of its inflation woes and allow for a much needed digesting of the sell-off.

Keep in mind that higher Treasury yields themselves pose a threat to the economic recovery in the form of higher borrowing costs for consumers and businesses. Not to mention higher mortgage rates, which could cut of the lifeline of the ailing housing market. In essence, the bond bears themselves may have created a situation in which their expectations for the direction of Treasuries cannot continue to exist.

We are sticking with our projections from yesterday...

Thus far, our support at 111'20 has held in the 30-year and if we can string a few days of gains together we may see 116'20 in the long bond. Likewise, we continue to see support in the 10-year near 112'20 and resistance at 116'02.

If you are following the short bond strangle, we bought back the July 109 puts at 8 ticks this morning to lock in a profit of about $328 on that leg before commissions and fees (assuming a fill at 29 on the entry).

Yesterday we had recommended that our clients sell the August 105 puts for 30 and try to get the 104 puts at 40 (for conservative traders). It is too late to participate in this trade now, in fact many missed it because if the quick reversal. However, we may look to re-work this at some point next week if bonds trade back to the lows. If you are interested in option selling, or spread trading, strategies you may find value in my book "Commodity Options" available through all major outlets.

Have a nice weekend!



**Seasonality is already be factored into current prices, any references to such does not indicate future market action.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)
• June 10 - We rolled the July 10 puts from the 112 puts to widen the strangle, we gave up about 41 ticks in premium to do it.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

The Bond Bulletin By Carley Garner

June 17th, 2009


Last chance!! Visit our websites to register for our upcoming FREE online seminar, Trade Like a Girl: How to Deleverage your Trading with Synthetic Options and Common Sense


5 days, 5 handles


Bonds and notes have been nearly as relentless on the upside as they were on the downside. It seems as though the light summer volume has aided one sided trade. The Treasury futures are infamous for overshooting equilibrium prices and it is obvious that last week's move was more emotional than fundamental. However, the rally may have reached its potential in the near term. Look for consolidation trade in the coming session or two.

Futures were leaning higher coming into the session, but it was a benign inflation report that allowed the buying to extend itself. The consumer price index was reported at .1%, a bit lower than expected. The core number was also at .1% to conform with analyst predictions. The news is bullish for bonds considering that deflationary concerns will slow down the recovery and the fact that the market had been selling off sharply in previous weeks in anticipation of eventual inflation.

Also helping the buy side, Standard & Poor's announced that it would be unlikely to changes its AAA credit rating for the U.S. in the "near term". If you recall, some of the bond and note retreat was attributed to rumors of a possible downgrade of government securities.

The week's remaining economic news shouldn't be catalysts for trade unless there is a large miss on the data. From here, we will likely see technical trade with the equity markets leading the way.

In yesterday's newsletter, we mentioned that we didn't expect the T-bond to get much higher than the mid-116's. As it turns out, the move had a bit more strength than we had anticipated but we still feel like a few days of back and filling are necessary. The nearest support will likely be found near 115'20/15 area. The note on the other hand, stayed within our projected upside target zone of 115'20 to 116 and we feel as though the bulls may need a break. Look for support near 114'22 then again at 114'11.

If you are following our bond strangle, we rolled the remaining short 118 call this morning into the August 110 put and 123 call. While the 118 will probably end up being fine, it didn't seem worth the risk given its proximity to the market and the light volume.



**Seasonality is already be factored into current prices, any references to such does not indicate future market action.




Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)
• June 10 - We rolled the July 10 puts from the 112 puts to widen the strangle, we gave up about 41 ticks in premium to do it.
• June 12 - We recommended that our clients buy back the 109 puts for 8 ticks.
• June 15 - We recommended that our clients (with this version of the spread) buy back the 110 puts for 8 ticks.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[gooseman]

any thought on skew in 10's?

 

[Hoggums]

Lol @ Trade like a girl !

 

[carleygarner]

The Bond Bulletin By Carley Garner

June 19th, 2009



Bond volatility declines, will it last?


Treasuries spend the last two sessions of the week attempting to digest the erratic trade witnessed in the previous several weeks. I can't speak for everyone, but I welcomed the day's relatively peaceful trade and look forward to a weekend away from the markets.

Many traders noted that the lack of consistent volume is exaggerating price swings. However, all in all it is likely that the market won't make any dramatic moves until after the FOMC meeting next week. The Fed isn't expected to take action, but that doesn't mean that the market won't react to any accompanying commentary.

From a technical point of view, the market's immediate direction is highly uncertain. We see critical support near 112 in the long bond and resistance near 118. From a fundamental standpoint, we think that seasonal tendencies will begin playing a bigger factor. Given the light summer volume, which is often the case with summer bond trade, and an overly bearish speculative stance taken by traders it seems as though the path of least resistance will be higher in the intermediate term. That said, we can't rule out a test of 112 support or maybe even a retest of the recent lows (if equities make another attempt at the rally) before the market gets more footing.

At current levels, we recommend that traders remain virtually flat. As outlined below, we are holding a short August T-bond 110/123 strangle. If you are trading the note, we see support at 112'17 at which time we begin to like the long side and resistance near 115'11 and again at 117'20.

Luckily, none of our clients were involved in the 5-year note trade recommended below. If you did, I hope that you bought the insurance (114 put) recommended in this newsletter on the 4th of June. If not, and you were able to ride things out you would be sitting with an equivalent loss at this point. We still feel like a break of 114'02 could lead to a rally to the 116 area. If you have nerve (and you bought the insurance) you may want to let this one ride for now.



**Seasonality is already be factored into current prices, any references to such does not indicate future market action.



Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.

May 21 - Our clients were recommended to sell the July bond 112 puts for 25, fills ranged from 25 to 23. This option traded at just 10 ticks early in the day but an explosion in volatility allowed us to sell the option for a considerate amount of premium. The premise of the trade is to profit from declining volatility and or positive bond movement. The strike price is over 7 handles out of the money to give the position a considerable amount of room for error but of course the risk is unlimited below 112.

May 27 - We recommended that our clients sell the July bond 109 puts for 25 or better, some fills were reported near 30.

• May 28 - For those holding both the 112's and the 109's we lowered the delta of the trade by selling the July 123 calls for 30 and buying the 110 puts for 56. If we detect stability, we will salvage what we can for the long put and hold the strangle.

• May 29 - we sold the long 110 puts this morning for 30 and are holding the lopsided strangle looking for a decrease in volatility and accelerated premium erosion.
• June 5 - We bought back the 123 calls for 5 ticks to take a profit on that leg
• June 8 - We sold the July 119 calls for about 30 and the 118's for about 32 to strangle the market (AKA stop the bleeding)
• June 10 - We rolled the July 10 puts from the 112 puts to widen the strangle, we gave up about 41 ticks in premium to do it.
• June 12 - We recommended that our clients buy back the 109 puts for 8 ticks.
• June 15 - We recommended that our clients (with this version of the spread) buy back the 110 puts for 8 ticks.

Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.

May 26 - Buy the June 5-year note at 116'05 or better ( you should have rolled this into the September contract, which would be equivalent to an entry near 115'06)
• May 29 - Look to liquidate this trade near 115'29
• June 4 - We recommended readers with this position to purchase a 114 put for insurance, hopefully if you have this trade on you were able to do so. Doing this would limit the risk on the trade to approximately $1,500 before commissions and fees.

Eurodollar Futures Trading Recommendations
**There is unlimited risk in trading futures.

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.