August 26th, 2008
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Quiet Treasury trade...
Traders spent a majority of the day awaiting the Fed minutes but even that turned into a non-event. During a week in which many traders and market analysts have taken the week off, those of us that have been showing up to work have been grossly disappointed.
The light volume conditions seem to favor the trend which is, and has been, decidedly higher. Current levels are becoming increasingly lofty, but Treasuries aren't the type of market to give up without a fight. The trader mentality has become buy all dips, and it often takes a dramatic event or technical fallout for such a change in market psychology.
New home sales were reported as an improvement over last month's data, but missed the mark when it comes to analyst expectations. However, with the Fed minutes on the docket the market didn't seem to pay much attention.
The Fed minutes didn't offer anything new but was successful in fortifying the bond market stance of tamer inflation and slower growth. The Fed's insistence on slower growth and revisions to forecasts in the next 4 quarters were enough to keep bond bulls smiling and the market moderately bid.
I made this statement in yesterday's report, and it still applies:
If you are short the October 121 calls as recommended below, you should be near break even or slightly underwater on the trade. Not bad considering the distance that the market has traveled. I am not completely uneasy about this position, but recommend proceeding with caution. Should the market have another day like today, it may be a good idea to add on. If you are properly margined and willing to take on the additional risk, look to sell the 122 call for 20 ticks or better.
I stand by the recommendation to sell a T-Note at 117'17. Contact me if you have questions or concerns.
Option Recommendations
**There is unlimited risk in naked option selling.
August 12 - If I am right, you may be able to sell the October 121 calls for 20 or better. Be patient and let the market come to you...if it doesn't it wasn't meant to be.
August 15 - This order would have been filled today. I am looking for an opportunity to buy this back quickly, contact me for details.
August 25 - Should the market have another day like today, it may be a good idea to add on. If you are properly margined and willing to take on the additional risk, look to sell the 122 call for 20 ticks or better.
Futures Recommendations
**There is unlimited risk in trading futures.
August 18 - Sell 1 Sept. T-Note @ 117'17 GTC, contact me for guidance or if you have questions.
Carley Garner
Senior Analyst/Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
http://www.decarleytrading.com/
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
