jrf230's  Instablog

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Cross-asset trader, dog walker, poker player and scotch drinker trying to avoid margin calls.
My blog:
Chart Emporium
  • TLT vol and skew selling off - time for calls? 0 comments
    Dec 28, 2011 8:22 AM | about stocks: TLT, VXX, VXZ, UST
    TLT vol and skew selling off http://chartemporium.blogspot.com/2011/12/tlt-vol-and-skew-selling-off.html

    If you think central banks continue to ease (QE, USD swap lines, LTRO, ... ) and/or markets continue to be jittery then taking a stab at treasuries to the upside through calls makes sense and has become fairly cheap. Also skew is selling off, which sets up nicely for call spread . Historically as skew sells off, treasuries tend to rally shortly after. Probably just a coincidence, but worth noting.

    note: Skew is the difference between puts and calls on an implied vol basis. I usually look at +1/-1 sigma ivol as it normalizes moves across asset classes. (a 1% move in gold is less likely than a 1% move in silver).

    Disclosure: I am long TLT, VXX.
    Stocks: TLT, VXX, VXZ, UST
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