We have an interesting pair trade here, you can take a short position in HYG
, paired against a long in TLT
to capture the profit from the spread closing. Right now, HYG
moved too much, relative to TLT
, so it's bound to correct back down, giving us a low risk trading opportunity. Position size should be enough to theoretically risk 0.5-1% of the account if price moves 3 times the daily ATR against you on each side (individually). You might have to hold a trade while it's in loss, but the combined profit/loss of the pair will result in a profit if the analysis is correct and this ratio starts to decline sharply.
We pointed this trade out at the Key Hidden Levels chatroom today. For more information contact Tim West, or me.