DailyPlay – Opening Trade (TLT) – March 20, 2024

TLT Bearish Opening Trade Signal

Investment Rationale

While the market expects no changes to interest rates during the FOMC meeting today, investors are paying attention to the updated dot plot. With last week’s hotter-than-inflation print, rising commodity prices, shipping disruptions, and a strong labor market, will the median dot plot reflect any changes? In my opinion, there is the risk that the median dot plot can shift to expecting only 2 rate cuts this year instead of the 3 the bond markets are pricing in. While this may not have a significant impact on equities, bonds will likely sell off further on such news. I propose putting on a hedge using TLT against rising rates going into today’s meeting. 

Technical Analysis

TLT has traded largely within a range of $92 and $98 and it’s been testing the $92 support level over the past few days. A catalyst such as a change in the median dot plot, or rhetoric from Chair Powell could send bonds lower. Putting on a hedge here would protect against a breakdown below these levels. 

TLT – Daily

Trade Details

Strategy Details

Strategy: Long Put

Direction: Bearish Put

Details: Buy to Open 10 Contracts May 17th $93 Puts @ $1.97 Debit.

Total Risk: This trade has a max risk of $1,970 (10 Contracts x $197) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $197 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is in a bearish trend.

1M/6M Trends: Bearish/ Mildly Bearish

Relative Strength: 4/10

OptionsPlay Score: 73

Stop Loss: @ $0.99 Credit. (50% loss of premium paid)

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Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

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