The Vaccine + TLT

Dear Trader,

The government is about to spend close to a trillion dollars on covid relief.

The vaccine is being distributed, and in a matter of months, it appears there will be some beginning of normalcy.

This means spending and a return to employment for a lot of hospitality workers (hopefully nearly all of them).

There is also likely to be one more stimulus bill when Joe Biden enters the Oval Office,  although that one might be smaller.

What does all this mean for us as traders?

Unless the FOMC is going to keep buying bonds, there will be some reduction in demand for bonds.

This is a pretty darn bearish outlook for TLT.

So, I was pretty surprised when I pulled up the VIX of TLT options and saw this:

Bond option premiums are about as cheap as they have been in the last 6 months.

They are at the lowest levels we have seen since the pandemic really began.

In other words, if you are near term bearish TLT like I am,  it is relatively cheap to put a play on that fades the TLT.

I looked at a Jan22 159-154 put spread (long) with Bill Griffo. At the time the TLT was over 160. TLT is now about 156.6.

That trade was a winner as it went from in the money to out of the money.

I like similar trades in TLT in the Jan-Feb time frame.

Stay tuned for more info as we kick off another short week.

The VIX light is RED

Your Only Option,

Mark Sebastian


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Leave A Response

* Denotes Required Field