/ZT 11/24 101'000 Short Put

I decided to take a shot at the US2 year treasury note bottoming.

The 10Y2Y yield curve spread has slowly been flattening.

The CME FedWatch Tool is showing an 88.5% chance of no rate hike in November.

Sold the Nov 24 101 put for 0’095 ($296.87).
Delta: -.27
Theta: .003
BPR: $968 (on IBKR)
IV Rank: 20.9
IV: 2.9%

Worst case scenario: I’m assigned a future contract @ 101 which I can then turn around and sell covered calls against.

Anton did a great overview on bonds this morning on tastylive:

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How about 'dis bond position, eh?

Bonds sold off on Thursday due to poor auction performance of the 30 year. And then were bought back as a flight to safety on Friday. On Monday, it’ll probably reverse direction due to…blah blah blah. You can go crazy speculating & prognosticating on market direction.

IVR: 25.4
Delta: +0.33
Theta: +0.003 (x2000 = $6.00/day)

Currently down on this position, but there needs to be nothing done here other than to enjoy the weekend.

The tasty guys did another great segment about Bonds on Thursday:

My thinking on using /ZT was to stay small, however, Tom says it is not a good product to trade for retail investors. I’ll have to ask them for clarification on that.

Enjoy the weekend!

I wrote tasty about why /ZT is not suitable for retailers. Heard back from the man himself

Tom’s response:

The /ZT’s have plenty of volume but the expected move is just ½ point to November and the relative bid/ask spread is wide considering the small, expected move. The /ZT options markets are still great but it’s difficult to make much given the challenges of very little movement and an institutional spread market. /ZN and /ZB have much better markets for retail investors. I hope this helps and good luck this week.

This position has taken some heat today. I’ll need to manage it at 21DTE (11/3).

How to manage a short put:

Is the yield curve flattening?

Random Animation pulled off the Internet:

Yesterday and today are showing some healthy green bars for /ZT:

Also, TLT ended the day yesterday down on heavy volume:

Maybe its the final capitulation that has to show up before the big reversal up. Many have gotten burned trying to bottom fish and only ended up catching a falling knife.

The 10Y minus 2Y spread also had a big move towards zero:

And after Powell’s speech yesterday, CME FedWatch tool is showing a 98.2% of no rate cute in November.

Focus of attention has shifted to December.

Have we hit the bottom? Have we returned to a normal world of bonds up, stocks down? Or am I just another trader “talking his book”?

Big pop today in /ZT after the Fed Announcement taking me out of this position hitting the 50% profit target.

STO: 0"095 (+$296.87)
BTO: 0"045 (-$140.63)
Commission: -$4.30
PnL: +$151.94
Days in Trade: 24 days