Posts Tagged ‘spreads’

Yield Curve Happenings: Long Bond Yield Drops, Everything Else Rising

Yield Curve Happenings: Long Bond Yield Drops, Everything Else Rising

Courtesy of Mish

Curve Watchers Anonymous noted an interesting thing on Friday and again today. The long end of the yield curve is rallying or steady (yields declining), while the middle portion of the curve is selling off (yields rising).

This happened on Friday and again today.

Yield Curve as of Friday’s Close (2009-12-11)

[click on charts to enlarge]

Yield Curve as of Monday (2009-12-14 15:21 EST)

On Friday, the 2-year, 3-year, 5-year and 7-year yields rose, with the 5-year and 7-year yields rising more than the 10-year yield. The long bond yield dropped.

Today, the long bond (30-year) treasury yield is lower again, with the 10-year yield flat, while the 2-year, 3-year and 5-year yields are rising.

This is not normal action to say the least.

On December 11, in Yield Curve Steepest Since 1980; Hard Times Ahead in 2010 I stated "Judging from action in the 5-year treasury, it appears as if there is a long 3-to-5 year, short 30-year trade in play."

Here is a chart I made last Thursday, and posted Friday.

Yield Curve As Of December 10 2009

Flashback July 16, 2009: Pimco Says Improving Economy to Steepen Yield Curve

The difference between Treasury two- and 10-year yields may widen to record levels set last month as the U.S. economy recovers, according to Pacific Investment Management Co., which runs the world’s biggest bond fund.

“Long-term rates will rise at a faster speed than short- term rates,” Pimco portfolio manager Tony Crescenzi wrote in a report distributed by e-mail early in the Asian trading day. “Market participants decided months ago that the Armageddon scenario was out and stabilization was in,” he said.

The so-called yield curve steepened to as much as 2.62 percentage points today, the most in almost four weeks. It rose to a record 2.82 percentage points on June 5 as investors demanded greater compensation for the risk that growth will spark inflation. Just a week ago, investors said the curve would narrow on signs the global economic recovery was petering out.

Clearly that was a good play and I congratulate PIMCO.

Should the pattern from today and last Friday continue, it would be a reversal of a long 3-to-5 year, short 30-year trade in play.

Certainly,


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Educational Videos

The following is a collection of podcasts and videos from the Options Clearing Corporation and selected others.

The cover a lot of ground and new ones are occasionally added to their site.  They are not as good as the coursework from MarketTamer, who are Option Sage’s excellent group but these are free (as opposed to $99 a month with Sage’s PSW special) so take a peek at the subjects that interest you:

First up is a very good introduction to options basics from Adam Lass, a very good overview.  His next episode is the basics of call options – hopefully he’ll do more.  Then we have the podcasts from OCC: 

 

 
  Introduction to Financial Markets and Options Basics  View
 
 
  An Exploration of Basic Options Terminology  View
 
 
  Options Basics  View
 
 
 


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Solving the Options Problem, Part 1

[Free subscription to PSW, click here  - it's easy - Ilene]

Constructing equivalent option positions,… 

Solving the Options Problem, Part 1

Courtesy of Minyanville, by Mark Wolfinger 

One of the interesting features about options is that there’s a relationship between calls, puts, and the underlying stock. And because of that relationship, some option positions are equivalent -- that means identical profit/loss profiles — to others.

Why is that important? You’ll discover that some option combinations -- called spreads -- are easier, or less costly to trade than others. Even with today’s low commissions, why spend more than you must?

The basic equation that describes an underlying and its options is: Owning one call option and selling one put option (with the same strike price and expiration date) is equivalent to owning 100 shares of stock. Thus,

S = C - P; where S = stock; C = call; P = put

If you want a simple proof that the above equation is true, consider a position that’s long one call and short one put. When expiration arrives, if the call option is in the money, you exercise the call and own 100 shares. If the put option is in the money, you’re assigned an exercise notice and buy 100 shares of stock. In either case, you own stock.

Note: If the stock is at the money when expiration arrives, you’re in a quandary. You don’t know if the put owner is going to exercise the put. Therefore, you don’t know whether to exercise the call. If you want to maintain the long stock position, the simplest way out is to buy the put -- paying $0.05 or less — and exercise the call.

Example of Equivalent Positions

There’s one equivalent position that you, the options rookie, should know, because these are strategies you’re likely to adopt.

Take a look at a covered-call position (long stock and short one call), or S - C.

From the equation above, S - C = -P. In other words, if you own stock and sell one call option (this is covered-call writing), then your position is equivalent to being short one put option with the same strike and expiration. That position is naked short the put. Amazingly, some brokers don’t allow all clients to sell naked puts, but they allow all to write covered calls. The world isn’t always efficient (you already…
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Zero Hedge

The Fed And The Treasury Have Now Merged

Courtesy of ZeroHedge View original post here.

Submitted by Jim Bianco of Bianco Research

As I've argued, the Fed and the Treasury merged. Powell said this was the case today (from his Q&A):

These programs we are using, under the laws, we do these, as I mentioned in my remarks, with the consent of the Treasury Secretary and the fiscal backing from the congress through the Treasury. And we are doing it to provide credit to households, businesses, state and local governments. As we are directed by the Congress. We are using that fiscal backstop to absorb any losses we have.

Our ability is limited by the law. We have to find u...



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Phil's Favorites

The PhilStockWorld.com Weekly Webinar - 04-08-2020

For LIVE access on Wednesday afternoons, join us at Phil's Stock World – click here.

 

Major Topics:

00:01:34 - Checking on the Markets
00:04:32 - Current News
00:31:34 - LEVI
00:35:08 - AMZN
00:39:26 - Mark Mahaney's Stock Coverage
00:43:00 - Public Transportation & Disinfecting
00:48:08 - Petroleum Status Report & OPEC
01:00:24 - COVID-19 Update | WYNN
01:16:00 - Portfolio Projection: Income Portfolio
01:17:23 - FUTURES
01:18:49 - Earnings Portfolio
01:19:27 - STP | LTP
01:22:52 - S&P 500
01:30:05 - AAPL
01:34:15 - VIX
01:36:00 - M
01:42:56 - VIAC
01:47:02 - XOM
01:50:29 - LB
01:52:44 - IRBT
01:57:48 - Crude Oil WTI
02...



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Biotech/COVID-19

COVID-19 is hitting black and poor communities the hardest, underscoring fault lines in access and care for those on margins

 

COVID-19 is hitting black and poor communities the hardest, underscoring fault lines in access and care for those on margins

Nurse Shelia Rickman participates in an after-shift demonstration on Monday, April 6, 2020, in Chicago’s Hyde Park neighborhood, after media reports of disproportionate numbers of black people dying from COVID-19 in the city. AP Photo/Charles Rex Arbogast

Grace A. Noppert, University of North Carolina at Chapel Hill

As the COVID-19 epidemic continues to ravage the American public, an unsurprisin...



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ValueWalk

Coronavirus symptoms, causes, prevention and cure

By Jacob Wolinsky. Originally published at ValueWalk.

The best case situation for Coronavirus or COVID-19 is that in a few weeks it dies down and things get back to normal. However, we must entertain the possibility of a far more frightening scenario.

COVID-19 models continue to change for the better

April 9, 2020 Update: More than 1.5 million people around the world have been infected by the novel coronavirus, and nearly 90,000 have died. In the U.S., the death toll surpassed 14,000 on Wednesday. Tuesday alone saw a record 1,858 deaths. So far, approximately 425,000 people in the U.S. have tested positive for COVID-19.

Although researchers say the peak hasn’t been reached yet, the model in use by the White House and many other agencies was updated on Wednesday. The number of projected deaths from the virus in the U.S. declined to 60,415 by August, compared...



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Kimble Charting Solutions

Silver/Gold Indicator Creates Largest Bullish Pattern In Decades!

Courtesy of Chris Kimble

Is an important metals indicator sending one of the largest bullish messages in nearly 50-years? Very Possible!

This chart looks at the Silver/Gold ratio on a monthly basis since the mid-1970s. Historically metals bulls want to see the ratio heading up, to send the metals complex a solid bullish message.

The ratio hit the top of the falling channel (A) back in 2011, where it created a large bearish reversal pattern. Since creating the bearish pattern at resistance, the ratio has experienced a significant decline.

9 years after hitting the top of the channel the ratio hit the bottom of the channel at (1) last month, where it looks to have created one of the largest monthly b...



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The Technical Traders

Adaptive Fibonacci Suggests Much Lower Prices Yet To Come - Part I

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system suggests a much deeper price move is in the works and the current price rally will likely end near resistance levels identified by the Adaptive Fibonacci Price Modeling system.  We are posting this research post for friends and followers to help them understand the true structure of price and to allow them to prepare for what we believe will become a much deeper downside price move in the future.

Fibonacci Price Theory teaches us that price moves in waves within up and down price cycles. The recent peak in price, near February 25, 2020, has resulted in a very deep -36% price collapse in the S&P 500 (ES) recently. This dow...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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