Thursday, March 10, 2011

(ZB) Adding to short position in 30-yr Treasuries

I was actually hoping the 30-yr bond auction today would be a dud and I could exit my short positions in the futures and the OTM calls. But it looks like the Middle East has put a temporary bid under bonds. Long-term I still think there are many headwinds for bonds to move higher, so as sickening as it feels sometimes to short against a spiking chart I did it anyway. I shorted at 120'16 and also sold a MAR3 weekly 121 call for 0'31. We're right at long-term resistance at 120'26, if we break that I'm going to have to take a wait and see attitude on adding any additional short exposure. I've got my buy to cover at the recent support near 118'16.

Also, something isn't quite right with today's action. Why was oil down? Perhaps that signals the move in bonds has less to do with the Middle East and more to do with the overall equities sell off. Whatever the reasons, I am comfortable with short exposure even if it moves against me in a big way as in time the bond situation will be resolved.


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1 comment:

  1. Jason,

    I think that oil was down for several reasons. One was due to the fact that this was the first "real" pull back from the parabolic move oil has had the last month since the middle east shit hit the fan. Oil was very overbought. Other news out this morning was the downgrade of Spain debt witch has restoked debt concerns. China had its first trade deficit in 11 months, the largest in 7 years. Fears of slowdown of the asian economy. And lastly and less important but still relevent was the step back jobless claims took again this morning.

    With all this I think that traders were jumping back into bonds modestly, selling equities, and bidding up the dollar.

    I was not watching bonds specifically but I did see that they were up on the day. Energy took a pretty big turn late in the morning when headlines came out that Saudi police had shot at protestors.

    Oh and I almost forgot the more important point that I originally wanted to make. I have noticed a pattern since the middle east tensions began, traders sell or take profits on Thursday only to get long again on Friday bidding prices up into the weekend...due to the fact that there is still so much uncertianty out there.