Quite the difference there. Thanks. I’ll watch *TBT*
I do see that QE 4 or whatever would be a danger.
What is kind of tricky about this form of bond “investing” (and it is probably a misnomer to call it “investing” because these 2x instruments should only be held short term.) is that they reflect not only a secular rise or fall in rates, but investor panic or complacency. When the stock market falls, many investors reflexively rush into bonds. THAT drives the prices up which HAS THE SAME EFFECT as if a rate rise had actually occurred. Think about that for a minute. We had a crappy end to last week. Stocks fell, investors/speculators rushed into bonds, driving prices higher. That is bad for TBT which is SHORT bonds.
At the same time, arguably it is a plausible buying oppty for TBT. The 52-week range of TBT is 57.61 - 82.80. Here is TBT at 58.72, very near its low for the year...(52 week year, not from 1/1/14)
I’d be willing to bet that one could buy TBT and sell October 61 calls against it and take in 1.45 of premium and have a very, very low risk trade IMO. If TBT is over 61 circa Oct 20, you are called out at 61 and the trade makes (61- 58.72 + 1.45)/58.72 = 3.73 /58.72 = 6.3% for 45 days. Much better would be to wait a little, have TBT rise, and maybe take in $2 or more of premium by waiting a bit to sell the calls. More like 7%. Very plausible trade, I might do that one.
TBT is really at a multi-year low here. I’d have to consider it low risk. And this is a real item, it trades ~~4 MM shs/day.