In the chat room yesterday, I suggested bottom-fishing in this vehicle after spotting an enticing opportunity during the weekly tutorial session. Based on a subsequent report from a subscriber, I’ve established a tracking position of four May 1 127 calls @ 0.25. They subsequently doubled to 0.50 after trading as low as 0.24. Taking a profit on half of the position would have been appropriate at that point, since it would have lowered the cost basis of the position to zero. However, there were no indications that any subscribers did so. Nevertheless, my recommendation remains the same as the one I posted in the chat room: Short as many calls at the 128 strike for 0.25 or more as you currently hold 127s. Obviously, this will be possible only if TLT takes a strong bounce today, since the options expire on Friday. Be ready to execute the trade on the opening bar, since it could correspond to a fleeting spike in the options we are looking to short. ________ UPDATE (May 1, 2:18 a.m. EDT): Thursday’s dip below a major midpoint support at 125.00 is troublesome although not necessarily fatal. Bulls will have to hold the line as the week draws to a close, however, since any further slippage will put a p2 target in play at 121.07, or even — heaven forbid — at D=117.19. At this point there’s no reason to be holding calls, although, with no reports in the chat room, I can’t tell what subscribers may have done with the original position. _______ UPDATE (May 6, 11:17 p.m.): Yesterday’s selloff breached a key support even more decisively than T-Bond futures exceeded a comparable support. Let’s see if last-ditch support at 119.91, a minor Hidden Pivot support, holds. If not, the 117.19 target given above will be very much in play. _______ UPDATE (May 7, 11:28 a.m.): T-Bond futures reversed sharply overnight, causing this vehicle to open this morning on a gap higher. The move is bullishly impulsive on the 15-minute chart, but I’d suggest caution if you’re going to trade it, since the T-Bond bottom occurred below a minor but still technically significant Hidden Pivot support.
