The Trade We Have Been Waiting For

Hey There Income Hunters,

 

Thursday, September 23, 2021 will be looked on as the day investors woke up … Jerome Powell’s “talk tough, do nothing” act finally played out its welcome …

 

The chart below illustrates the iShares 20+ Maturity Treasury Bond ETF (Ticker: TLT). Each horizontal line represents each one of Jay Powell’s past 4 FOMC speeches … You know, his usual “inflation is transitory and we have the tools to deal with inflation” broken record speeches.

 

Notice how positively investors reacted after the first three speeches …Powell was able to convince investors the Fed was in control for a while:

 

After each of his FOMC speeches I would call Powell out for just flat out deceiving America … For example, here is what I wrote on July 28 …

 

Something changed on Wednesday, and on Thursday, the bond vigilantes rose from the dead.

 

TLT closed lower by $3.43 a share, when options were currently pricing in a daily move closer to $1.

 

Today I will show you the shocking TLT option data, and what it means for TLT in the weeks ahead … 

 

TLT Put Buying Exploded the Past Two Days 

 

Notice the red oval illustrating the option volume from the past two days. 

 

      • On Thursday, put volume was 350% higher than calls at 174,000 puts traded.
      • On Wednesday put volume was almost 500% higher than calls. with over 190,000 put contracts traded.

 

The Worst Performing Months for Bonds are Ahead of Us 

 

There is a strong seasonal pattern that shows bond yields rising/prices falling the most in October and November.

 

This year should certainly follow suit, unless the Fed is going to officially, or unofficially, cap interest rates.

 

I think that they will eventually, but certainly not before TLT gets below the lows of March ‘21 below $135.

 

Bring It Home

 

At Option Pit we have built a community for our Pro members where we see amazing ideas, and incredible information flows. The Pro chat is filled with professional traders, and really great people.

 

A few have been trading TLT, as it is a deeply liquid bond ETF. When I offer my ideas about setting up bearish options strategies, the group offers me their opinions in return. 

 

TLT trades could make the year. When you have fundamentals and technicals come together like this, plus a global macro force that could drive massive flow into the trade, it could be hugely profitable. 

 

I will share the ideas we gather for you to consider, but until then …

 

Live and Trade With Passion My Friends,

Griff

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