I have a bit of a pet peeve; due to my desire for precision.
The pet peeve? People who call TLT, “Bonds” or “the Bonds”. I can see calling 30 year Bond Futures, the ZB or even the Ultra’s, “Bonds”; although technically speaking they are derivative of the cash. But TLT? Nah. TLT is a derivative, using derivatives, of Bonds.
But that, that is all an aside.
This afternoon, our Proprietary “Risk Assets” model, switched us from “Neutral”, to borderline “Bullish”. Right on the hairline border of turning bullish.
Of course, by pure happenstance, this is post the Fed Release and Conference. And since it is after a major news event? That means that all implied volatility has unfortunately bled out of option pricing. It’s not that we look to sell premium after a news event. That would be foolish. We have found that the best time to sell premium is before the news event, on a liquid, thick asset; when implied volatlity is nice and ‘juiced up’.
But due to this switch in our stance, we had a few moves to make, for our own portfolios and we can look to translate some of this into plays for the GTC Portfolio.
As I said, trying to find some vol for options to sell premium, was challenging, to say the least.
But as we were speaking of TLT earlier, we did manage to sell some naked put premium there. If we were to translate that to this GTC Sample Portfolio? We will consider …
… Having sold 1 November 24 TLT 82 Put at 0.28. The IVR was 57.9 (thus, there was something in the way of implied vol to sell), with the VIX at 15.82. The Δ’s were at -0.12 with a corresponding PoT at 26%. We simply sold it naked. Because if we are assigned from that put, I can simply roll the assigned 100 shares of TLT into another strategy we have in our arsenal, that involves TLT. If we are not assigned, then I can simply take that small premium, and stack it onto our unrealized positions that are rallying and the 30 Day Treasury Bill that we are carrying to term.
Yes, we are selling a derivative, on a derivative, that uses derivatives. So sue me …
The SPY short in the form of SH that we currerntly have on? I am keeping that for now. I will need to see more follow through, before trimming that ‘short’ position out. At some point, a mean reversion on this move in Equities wouldn’t surprise me. Therefore, I’ll wait before trimming the SH position.
And following the thoughts of the great Bill Gross on X this afternoon? If we do see some follow through? I wouldn’t mind buying a bank stock. Not yet. But perhaps soon. Ya’all have been keeping an eye on those Credit Default Swaps right?
Right?
Regardless … that’s what I had my eye on this afternoon, and how it translates into the GTC Sample Portfolio …
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