So this seems to go against my general view that inflation and interest rates are going higher - and it does. However, this is a small position and it diversifies nicely my short bond futures position. Also, this position benefits from a steepening of the yield curve. Oh, and if I'm wrong? then yes, I'll own more of this REIT and mortgage bonds at a level where I am comfortable buying long term bonds and mortgages.
Thus, I did one of my favorite options strategies on an asset I feel whose value I understand and who's volatility is not oversold.
Bought NLY at $13.68
Sold NLY Jan 2008 12.5 strike puts at $0.95
Sold NLY Jan 2008 15.0 strike calls at $1.00
NLY 1-yr chart:
Disclosures and confessions: I own NLY. I am short Jan 2008 12.5 Puts and 15 strike calls on NLY. This position benefits from declining interest rates, a fundamental view I do not hold.