This is a sample entry from Don DeBartolo’s email newsletter, Trade Spotlight: Options, published on Monday, August 01, 2016.
There is an opportunity to collect premium in the 30-Year Treasury Bonds options market. After the September 2016 30-Year Bonds futures contract rallied to a high of 177-11 (7/11/16) following Brexit, the contract pulled back setting up a number two point at 169-31 (7/21/16). On Friday 7/29/16, the chart formed the number three point of a 1-2-3 Top Formation as the contract sold off the following session. The next Fed meeting is not until September 21, two days before option expiration. Trend Seeker is Neutral with a Bearish ranking. Selling options now in anticipation of the breakout to collect additional premium at this time. Option writing involves unlimited risk and a margin requirement. However, by purchasing an option in the same market the potential risk can be cut down as well as lowering the margin requirement as seen below.
Sell the October 2016 Bond 178 call at 40 points or $625. Option expires in 53 days (9/23/16).
To minimize the risk and reduce the margin requirement simultaneously:
Buy the August 2016 second week Bond 178 call on 4 points or $62.50. Option expires in 11 days (8/12/16).
Each spread will collect $562.50 in premium. The margin requirement is $687.80.
Risk: Limited until the August 12th options expire.
Reward: $609.375 per spread not including commissions and fees.
September 2016 September Bonds Chart
Contact your Daniels Trading broker by phone or email to place this trade.
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