Over the past couple of months, bond prices have fallen steadily as a result of higher yields. While in the short term the trend might reverse, I share the wider view that long term bond yields will rise further.
Initiating a diagonal spread – synthetic covered write – Long far dated ITM calls, Short near dated OTM calls.
BUY +10 1/-1 CUSTOM TBT 100 JAN 15/AUG 13 70/80 CALL/CALL @12.61 LMT
There are numerous embedded rolls & would look to sell calls periodically to reduce/eliminate the overall cost.
The eventual idea is to own TBT at $70/share plus the cost of the spread (which hopefully can be reduced significantly by selling calls as indicated above), unless TBT closes lower than $70 at expiration.