TLT Analysis

iShares 20+ Year Treasury Bond ETF (TLT)

Update 10/24/2017: Another roll forward for TLT with the strikes $1 lower, and the long-term government debt downtrend continues. I also moved the expiration date out a month, to Dec. 15, which is 50 days away from entry.

I exited my position of 10/4 for a $0.24 debit, or 50% of maximum potential profit, having entered for a $0.48 credit.

As I enter the 10/24 position, TLT’s IV stands in the 18th percentile of its annual range and at the peak of its most recent broad movement, although within a very narrow range that has held sway since July.

Premium: $0.50 Expire OTM
TLT-vertical Strike Odds Delta
Calls
Long 127.00 82.0% 16
Break-even 125.50
Short 125.00 66.0% 32

Update 10/4/2017: I have rolled TLT forward with the same strike prices, collecting additional premium from the series.

I used the same series of options options, that that trade for the last time 44 days hence, on Nov. 17.

Implied volatility stands at 11%, which is about the same as the VIX, a measure of the volatility of the S&P 500 index.

Premium: $0.48 Expire OTM  
TLT-vertical Strike Odds Delta
Calls      
Long 128.00 84.1% 17
Break-even 126.48    
Short 126.00 73.1% 28

The premium is 24% of the width of the position’s width.

The risk/reward ratio is 3.2:1.

Shares were priced at $124.42 both for the analysis and the trade.


Update 10/3/2017: I exited TLT for a profit and intend to roll it forward , probably on Wednesday. I shall reserve the results calculation until the entire series is complete.

Having entered for a $0.52 credit, I exited for a $0.09 debit, or 82.7% of maximum potential profit.


TLT is the standard fund used for tracking long-term U.S. Treasury bonds. Their most recent downtrend began with a peak on Sept. 11. My Elliott wave analysis of the chart suggests that there is more downside ahead that would warrant a directional bear play.

I shall use options that trade for the last time 49 days hence, on Nov. 17..

Implied volatility stands at 11%, which is 1.2 times the VIX, a measure of the volatility of the S&P 500 index.

TLT’s IV stands in the 7th percentile of its annual range and at the peak of its most recent broad movement. Those numbers indicate a very narrow range following a high level of IV. It’s not the sort of IV pattern i would trade in an earnings play, but for TLT, the directionality is the important element.

The price used for analysis was $124.905.

Premium: $0.52 Expire OTM
TLT-vertical Strike Odds Delta
Calls
Long 128.00 61.9% 40
Break-even 126.52
Short 126.00 76.2% 25

The premium is 26% of the width of the position’s width.

The risk/reward ratio is 2.8:1.

Decision for My Account

I have entered an order on TLT as described above. The stock at the time of entry was priced at $124.87.

By Tim Bovee, Portland, Oregon, Sept. 29, 2017

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

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