Ditch Bonds, Grab TLT Options CashThink bonds are safe? Think again! Discover how savvy traders are cashing in with TLT options instead.
Thought bonds were a safe bet? Well, the joke's on you. The ETF tracking long-term Treasury bonds, TLT, has been on a slippery slope for three and a half years. And from the looks of it, we're not seeing a rate cut anytime soon. But if the rates don't rise, and the market has already priced this into TLT, there's a chance for a rebound. The market is leaning optimistic, with out-of-the-money call premium higher than the put, indicating an upside risk bias. So, what's the trade Josh? If you're leaning bullish on the TLT, but also want to put the odds in your favor. A trader could consider this bullish option strategy by shorting the 85.50 put for $0.54, expiring in 50 days (May 1, 2024). Sounds technical, right? Here’s the breakdown—this play has a 92% chance of raking in half its max profit before the cows come home (or before the option expires, to be exact). And with a daily theta (trader speak for passive cash flow) of $1.41, you’re making money in your sleep as long as TLT stays above $85.50. In plain English? You're getting paid $54 today just to take on this risk. As long as TLT stays above $85.50 in the next 50 days – and today, it closed at a comfy $89.81 – you're in the green. And should our 92% probability hold true and this put dips to $0.22 before then, just buy it back, pocket the change, and set up for another go. That’s how you make the options market work for you, turning what many see as a market downturn into a profit-making opportunity. Rinse and repeat, and watch those returns snowball. Good trading, and remember – rent's due. Josh Belanger
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2024年4月11日星期四
Ditch Bonds, Grab TLT Options Cash
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