I missed a monster trading opportunity on TBT today. I've been making a bull case for TBT for a long time, but missed it this time after making money 3 out of last 4 times we traded it. I have been waiting to get any sort of profit taking to get back in, but I am not sure the market wants to give me one.
First, a quick snapshot. Even though, TBT is a long way from fully breaking out of its recent trading range (47-50), the volume is telling me the breakout is imminent. Call volume is 55K vs. daily average of 18K and 55% bought on the offer. The largest trade was 6000 June $55 calls bought above offer price at $0.29. They're now going for $0.40.
Share volume is the highest in 52-week period.
Given the fast run up today, I am going a bit far in the future and doing the following bullish risk reversal:
- Buy to open June $45 puts
- Sell to open June $47 puts, for net credit of $0.55
Use the proceeds from above bull put spread to:
- Buy to open June $54 calls for $0.53 debit
The whole trade is done for $0.02 net credit. The break even on the downside is $47 which is the support area that I expect to hold. $47 also coincides with 3.60% yield on 10-year. The upside profit potential is unlimited. I like the odds.
Good luck!
- Buy to open June $45 puts
