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Treasury futures move higher on options expiration

August 26, 2011


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Treasury futures move higher on options expiration


In today's world, bad news is good long as it isn't "fall of the cliff" type of bad news.  Many seemed to sigh in relief this morning on news that the GDP was revised lower to 1.0%.  Six months ago this would have been tragic news, but the fact that it is still in positive territory was enough for today's standards.  Similarly, the Michigan Sentiment was reported at 55.7 which is in the same ballpark of the late 2008 all-time low figures.  Yet, again most viewed it as a positive sign that we didn't get a repeat of the Philly Fed (fall off the face of the earth) bombshell. 


With chaos in Europe in a bit of a climax and Greek sovereign debt securities trading near all time high yields, Treasuries might not be done to the upside just yet...although we think bond bull's days are numbered. 


On Friday' stocks and bonds moved up in tandem...perhaps both markets feel as though Bernanke's lack of action today will somehow lead to QE3 tomorrow.  Or, stock traders took it (and ran with it) as a glass half full outlook from the Fed, while the bond traders are questioning the stability of the economy.  They say the Treasury market is "smarter" than the stock market...I'm not sure I agree with that but I will say that participants seem to be a little more level headed most of the time. 


Even if equities come in higher Monday morning, I'm not sure Treasuries will be willing to give back the day's gains and from a purely technical standpoint look poised to move higher regardless of what might be going on in other markets.  After all, the calendar is chock full of scheduled reports and the news has been shaky at best.  Also, Hurricane Irene isn't expected to be a game changer but that doesn't mean there won't be some uncomfortable investors allocating into safety for the short-term. 


First notice day for the September Treasury futures is on Wednesday, you should be rolling into the December contract if you haven't already.  A short squeeze in the December 30-year could mean a run to 139'09, and even 141'05 if things get out of hand.  This is equivalent to 130'01 and 131'03.  Look for sharp rallies to establish bearish trades...selling quiet markets can be a tough game.


*Note charts are still September contracts 

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.  However, market analysis and commentary does.  



**Seasonality is already factored into current prices, any references to such does not indicate future market action.


Treasury Bond and Note Option and Futures Trading Recommendations

**There is unlimited risk in naked option selling.




In other markets....



8-26- Clients were advised to sell October corn 820 calls for about 9 cents.


(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more.  Email us for more information)



Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading


Local : 702-947-0701

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*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.


Past performance is not indicative of future results.  The information and data in this report were obtained from sources considered reliable.  Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.  Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.