Commodity, Futures, Forex and Everything in Between

10 year note strategy

YOU MUST ALWAYS BE AWARE THAT THERE IS SIGNIFICANT RISK INVOLVED IN TRADING FUTURES AND/OR OPTIONS ON FUTURES AND ARE NOT SUITABLE FOR ALL INVESTORS.

I had every intent to suggest initiating bear put spreads when I starting writing this article. My own bias is for intermediate interest rates to go up, which means that 10 year note futures would need to go down. As I said, that was my intent.....but after looking at a weekly and monthly continuation chart, I've changed my mind. The market is telling me that it wants to go higher based on the formations that I'm seeing. The daily chart has been basically sideways since September. The weekly picture looks like it is forming the right trough of a W bottom. The monthly picture looks like a downflag that wants to rally to the highs made in March of 2003 and March of 2004 - close to the 118.00 level. Based on these pictures, I want to buy June 10 year note 113 calls at the market. You should get filled somewhere close to 40/64's, or around $625 per contract before commissions and fees. These options don't expire until the third week of May, so you should have time for the market to work. I would exit the trade if the June 10 year notes closed below the low made in July 2004, which was 109.05 1/2. I will update this recommendation from time to time.

Steve

posted by steve erdman @ 2:01 PM