NaughtyPines

POST-FOMC: THE RETURN TO BREAD AND BUTTER TRADES -- TLT IC

AMEX:TLT   ISHARES 20+ YEAR TREASURY BOND E
Now that FOMC is past, it's time for me to return to bread and butter trades, and these ordinarily are in TLT/TBT and the index ETF's -- SPY             , IWM             , DIA             , and QQQ             .

Currently, TLT             IVR             (implied volatility rank) is 42. Although it isn't anything to write home about, TLT             (or its inverse, TBT             ) is one of my bread and butter trades, and I'll put a trade on 25-45 DTE             (days until expiry) in any volatility environment where the IVR             is greater than 35. Additionally, putting a trade on here is somewhat attractive, since TLT             is kind of smack dab in the middle of its range between 115 and 128, which means that price can slop around quite healthily in here prior to expiration.

EXAMPLE:

October 30th Expiry TLT             Iron Condor: 113.5 Long Put/116.5 Short Put/127.5 Short Call/130 Long Call
POP (Probability of Profit): 68%
Break-Evens: 115.85/128.15
Max Profit/Buying Power Effect (BPE): .65/contract; 2.35 per contract
Delta: 1.26 per contract

ALTERNATIVE:

October 30th Expiry TLT             116.5 Short Put/127.50 Short Call Short Strangle
POP: 73%
BE's: 115.18/128.82
Max Profit/BPE: 1.32/contract; undefined
Delta: -2.62 per contract

Notes: Look to take off the entire setup at 50% max profit. Naturally, the credit received may change before Monday's New York open ... .
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