This is a sample entry from Don DeBartolo’s email newsletter, Trade Spotlight: Options, published on Monday, August 01, 2016.
Option Writing
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.
Risk Disclosure
WHEN INVESTING IN THE PURCHASING OF OPTIONS, YOU MAY LOSE ALL OF THE MONEY YOU INVESTED.
WHEN SELLING OPTIONS, YOU MAY LOSE MORE THAN THE FUNDS YOU INVESTED.
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
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