David P. Simon, “Examination of long-term bond iShare option selling strategies,” Journal of Futures Markets advance online (2009).
This article examines volatility trades in Lehman Brothers 20+ Year US Treasury Index iShare (TLT) options from July 2003 through May 2007. Unconditionally selling front contract strangles and straddles and holding for one month is highly profitable after transactions costs. Short-term option selling strategies are enhanced when implied volatility is high relative to time series volatility forecasts. Risk management strategies such as stop loss…
Some people regard the bond market as the most mature financial market, providing discipline and stability where stock operators merely exhibit fear and greed. I’m not out to settle any internecine disputes here, but I do want to examine a strategy premised on the view that behavior in the bond market might tell us something useful about the equity market.
Conventionally, investor preference for higher yield correlates with a positive overall economic outlook. Brett Steenbarger looks at this phenomenon over the past…
Maybe it’s just us, but markets seem really boring and indecisive this week. There’s not much to talk about unless you want to talk oil or bonds. We’re beyond sick of hearing and talking about oil (though we’re dipping a toe into some short positions here), and although bonds are always more exciting than people give them credit for (we’re still in love with munis this year), well, meh.
We’re in the mood to do another newsletter takedown, so if you…
Tuesday, September 1, 2009
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