To The Moon

Amid heightened geopolitical tensions in the Middle East and as investors awaited U.S. large-cap tech earnings and key economic data this week, the U.S. 10-year Treasury yield hit the 5 percent mark and the S&P 500 recovered from an intraday low of 4,189 to close at its lowest since May, below its 200-day moving average.

The 2-year Treasury rate fell 3 basis points to 5.06 percent, while the 10-year rate climbed more than 5 percent and fell 9 basis points to 4.84 percent. Bill Ackman, founder of Pershing Square Capital Management, on Monday covered short positions in long-term U.S. Treasury bonds, saying global risk is too high to be sustained right now.

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$iShares 20+ Year Treasury Bond ETF(TLT)$

When the bond market is falling, it means bond prices are decreasing, and yields (interest rates) are rising. Rising yields can offer more attractive returns for investors than stocks, increase the cost of borrowing for companies, and cause the “discount rate effect” (That is, future earnings are worth less in present terms because the value of a stock is often calculated based on its future earnings, discounted back to the current value). While there is not yet proof of a reversal in bonds, the $iShares 20+ Year Treasury Bond ETF(TLT)$ is at max oversold levels (usually leads to a bottom or at least a bounce. Furthermore, Bill Ackman, a billionaire hedge fund manager, announced via social media that he covered his bond short bet.

Based on Monday's options volume, the No. 1 volume came from sold call and the No. 2 volume came from bought call.

For the CALL option, the first sell volume came from $TLT 20231229 90.0 CALL$ . Single-leg strategy transactions accounted for 89%, which means that the market judges that TLT will have a high probability of hovering below $90 by the end of the year.

For the PUT option, the first sell volume came from $TLT 20231027 85.0 PUT$ . The strike price selection of in-the-money options in a sell strategy usually means that the counterparty is extremely confident in the trend, and the TLT trend is not bearish this week.

From the perspective of high winning rate, the combination option strategy is a better choice. Considering bottoming and top pressure, traders can choose either a put spread strategy or a call spread strategy:

• sell $TLT 20231117 78.0 PUT$

• buy $TLT 20231117 76.0 PUT$

or

• sell $TLT 20231027 85.5 CALL$

• buy $TLT 20231027 87.5 CALL$

Option buyer open position (Single leg)

Buy TOP T/O:

$MSFT 20240216 300.0 CALL$ $INTC 20231117 35.0 PUT$

Buy TOP Vol:

$MSFT 20240216 300.0 CALL$ $INTC 20231117 35.0 PUT$

Note: This image data is from Tiger PC. This screening is a significant buy open position for options contracts in the market. The purchase of a call option means that the trader believes that the underlying has upward momentum, and the purchase of a put option means that the trader believes that the underlying has downward momentum. These contract openings typically indicate significant activity in the underlying stock, including whether the trader is willing to accumulate a long or short option position.

Option seller open position (Single leg)

Sell TOP T/O:

$NFLX 20240315 410.0 PUT$ $AMD 20251219 140.0 CALL$

Sell TOP Vol:

$TCOM 20231117 38.0 CALL$ $PBR 20240119 8.0 PUT$

Note: This image data is from Tiger PC. This screen is a significant sell open position for an option contract in the market. A sell of a call option means that the trader believes that the underlying trend has peaked, and a sell of a put option means that the trader believes that the underlying trend has bottomed. These contract openings typically indicate significant activity in the underlying stock, including whether the trader is willing to accumulate a long or short option position.

Options portfolio open position

Note: This image data is from Tiger PC. This screening is a significant portfolio of options contracts in the market. Portfolio opening includes a variety of underlying trends, requiring traders to further master the basic knowledge of options for analysis and judgment.