New Position: TLT

I bought the August 100/101 call spread for .395. This is in contrast to my July 101/102 short call spread. I am currently looking to walk that call spread out for a few pennies, or even close it out entirely for a small loss as I'm more bearish now than when I put that trade on. My general feeling is that as earnings roll in starting in July, that no matter what actual earnings are, the guidance will not be what current projections are and thus earnings need to be restated for equities going forward. I think bond yields will continue to go lower until we get reconfirmation that GDP growth actually exists. It's also possible that the correction in equities and run in bonds has already properly discounted this scenario. So, in case I'm wrong, I also sold August 93 puts for .45. So this is a small net credit trade that carries risk below 93. For this to occur earnings and guidance would have to be great in order to get stocks to rally and bonds to sell off. I just don't see this so I put my money where my mouth is. I'll have to manage my risk to the downside should this start to occur because I would not be interested in taking possession  of this instrument.

Here is the combined diagram with call spread and short puts. I've also included the IV screen shot. TLT actually sees an increase in IV as the underlying price increases, this is similar to how gold IV reacts for the obvious reasons. This is another reason why I wanted to own the call spread rather than be short it. You can match up the dates on the chart for spikes in TLT and the spikes in IV.

TLT chart

For the next three weeks I'm actually liking the put spread sale better. This is looking like a gold chart, which makes sense I guess as the flight to safety is usually to gold and US treasuries.

TLT

I put a day order in for Thursday on TLT selling the 101/102 for .23. The only time we've traded higher than seen in the chart below is Sep 08'. This is one of those plays that will tie in to my SPY put hedge in that if I were to lose the max on this trade, meaning yields on the 30-year break under 4%, I can only assume that means equities sold off hard. I used the number of contracts that would set  my max possible loss at 1% of trading capital. I'm going to try and stick to 1% per trade for a while and see how things go. Already early on I'm a little uncomfortable looking at the dollar amounts, but I realize I have to look at things in terms of percentages. And trading .5% per trade doesn't make a whole lot of sense unless I'm doing serious volume trading, which I'm not. Also, though I'm comfortable with the smaller dollar amounts used in the past, self admittedly it was too small and capital was not being used efficiently.