Looking Ahead to Non-Farm

It was a slow news day but traders appear to be preparing for the plethora of data that will be released in the coming days. Accordingly, today’s range trade could be a precursor for a much larger move in Treasuries as the coveted employment report approaches.
Pending home sales were up 1% to meet analyst expectations. The news came as a relief following the previous month’s drop of 16%. However, there is concern that the sales were borrowed from the future courtesy of the government home buyer incentives.
We were getting (unconfirmed) chatter of heavy call buying in the Bund (Europe’s benchmark government security). One trade in particular involved the purchase of 22,000 of the March Bund 25 calls by “paper” (speculator). Goldman Sachs on the other hand was rumored to be selling VIX puts in large quantities. Assuming that this information is true, it suggests that there is a great deal of nervousness behind the recent equity recovery and pause in the Treasury rally.
The charts and fundamentals are mixed, so we will refrain from making any bold calls for now. We see some minor resistance in the long bond near 119’19, but a break (and hold) above this important level suggests a rally to the 120 area. If you are trading notes, be prepared for a possible up move to 118’23ish.
*Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
January 20 – Our clients were recommended to sell call options this morning against the rally. Specifically, we like the idea of being short the March 30-year bond 121 calls. Fills were being reported anywhere from 23 to 26 ticks or $395 – $406.
ยท February 1 – We recommended buying back this option for 11 or 12 ticks, fills came in accordingly and locked in a profit ranging from 11 to 15 ticks per contract minus commissions and fees.
Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
Local : 702-947-0701
*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.


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