Skin in the Game
Market: $ZB_f, ZBZ12, 30 year bond
Buy or Sell?: Sell October 139 puts for about 25 ticks ($390), neutral to bullish premium collection strategy.
Range: 145’27 through 145’07 is a large band of support, that could prove to be an opportunity for bulls.
The Treasury market has completely erased its “QE3″ rally that began far before QE3 was actually implemented. However, strong seasonal tendencies, and an overstretched equity and currency market are setting up to give bonds the catalyst it needs to find support near 145’07ish. The six handle plunge in the ZB seems to have created an attractive opportunity for option sellers. For instance, relatively deep-out-of-the-money puts have picked up a substantial amount of premium in a short amount of time.
Specifically, we like the idea of selling the November 139 put for about 25 ticks ($390). More aggressive traders can consider the 140s for 34 ($531). The November 139 puts are nearly seven handles out-of-the-money which should give the market ample room to breathe if our timing isn’t idea.
*There is unlimited risk in selling options!
Futures, Options, Integrity
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