Add TBT Calls

Playing the 10 and 30 Year Auctions

By Bryan Bottarelli
Tuesday, August 11, 2009 3:06 PM EDT
Tue, 11 Aug 2009 19:06:00 GMT

*Play: Buy the TBT August 50 Calls (TBT HX) at or under $2.00, good for the day. Place a protective stop limit at $1.10 and a sniper sell at $3.50.

Dear Bottarelli Research Member,

Leading into the final hour of trading, I’d like to make one last play on the UltraShort 20+ Year Treasury ProShares (TBT – NYSE).Here’s the backdrop…

As you may or may not know, the Treasury is auctioning off a record $75 billion of notes this week, most of which will refund $60.9 billion in maturing securities. So once again, Washington is trying to resolve a crisis caused by excessive debt by creating even more excessive debt.

TBT

This afternoon, a $37 billion auction in 3-year notes apparently went alright, which has pushed the TBT lower. But tomorrow and Thursday, this trend could reverse. You see, shorter-term notes always tend to do better than longer-term notes. So today’s 3-year auction is causing the TBT to dip. But when it comes to the $23.0 billion in 10-year notes (scheduled for Wednesday) and the $15.0 billion in 30-year bonds (scheduled for Thursday), any disappointment could send the TBT shooting back up. In my Taipan Wealth Conference presentation (that I will be giving this Thursday), I outline how China is becoming less and less interested in taking on more U.S. debt. Once their wallets close, the TBT could blast much, much higher. Leading up to these auctions, let’s get positioned to ride any upward move.

Play: Buy the TBT August 50 Calls (TBT HX) at or under $2.00, good for the day. Place a protective stop limit at $1.10 and a sniper sell at $3.50.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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