The set-up: Bonds had a selloff that lasted the last two weeks, but showed some signs of stabilization over the last two days. I don’t think the bull run for bonds is over. There’s a rally coming here; there’s too much uncertainty in the world at this point. (I feel the same way about gold and miners, actually, it’s just a little too early to be trading in those spaces.)
What I’m doing: I’ll be buying Direxion Daily 20+ Year Treasury Bull 3X ETF around $20 today and looking for an 8 to 10 percent gain if I’m right. Sticking with my trading disciplines, I’ll stop out at a 3 percent loss if the selloff resumes.
Bonus point: I’m confident enough that bonds will move in the right direction that I bought call options on the iShares 20+ Year Treasury Bond ETF (TLT) on Tuesday. I bought 100 July 28 TLT calls at $1.30.
Jeff Bishop is lead trader at TopStockPicks.com. He runs short-term trading strategies, primarily using leveraged ETFs. At the time this was published on RagingBull.com, he did not own shares in TMF but he was planning to make a purchase as described in this commentary; he held the call options on TLT described here.