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Post by yclept on Feb 11, 2011 16:52:34 GMT -5
TBT got hit for over 2-1/2% today. I would have expected that the talk about scaling back FNM and FRE and moving all financing of mortgages eventually to private companies without government backing would have raised interest rates today thus sending TLT lower and TBT higher. I don't know which way or by how much interest rates changed, but TLT was up and TBT down, so I'm assuming the underlying treasury rate was down (i.e. bonds went up).
I do know that published and advertised mortgage rates I'm seeing lately are about 1% higher than they were when I refinanced the house the beginning of November.
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Post by danshirley on Feb 18, 2011 10:39:11 GMT -5
Another week later:
TLT: -182
TBT: +118.65
Short call: +111
Dividends: 64
TOT= 111.65 in 43 days
TBT/TLT = 8632.25/17898 = .482
Total capital =26530
Interim yield = 111.65/26530 = .0042 in 43 days or 3.57% annualized.
For TBT capital to be half TLT it should be 8949. At 8632 TBT is $317 short or about 8 shares at current price. To rebalance I could buy 8 additional shares of TBT... but I won't. We'll just see where we go.
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rovo
Senior Member
Joined: Dec 18, 2010 14:20:19 GMT -5
Posts: 3,628
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Post by rovo on Feb 18, 2011 10:47:14 GMT -5
Dan, I just wanted you to know I am watching this play / experiment with great interest. I don't comment on it but I'm interested in it.
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Post by danshirley on Feb 25, 2011 13:46:09 GMT -5
Another week later: TLT: +376 TBT: -390.90 Short calls: +41 Dividends: 64 TOT= 90.1 at 50 days TBT/TLT = 8122.70/18456 = .440 Total capital =26578 Interim yield = 90.1/26578 = .00339 in 50 days or 2.47% annualized. A dividend payment is due March 7th. finance.yahoo.com/q/bc?s=TLT&t=3m&l=off&z=l&q=c&c=finance.yahoo.com/q/bc?t=3m&s=TBT&l=off&z=l&q=c&c=TBT is now way below half of TLT but we don't want to correct that now... or do we?? It's clear that TBT by itself is not adequate to hedge TLT. We need the short calls to even things out. We started this trade in order to hedge against declines in TLT which everybody was SURE was going to be disastrous. That was before the middle east got hot and TLT started to be a 'safe haven' again. If I hadn't hedged I would be way ahead since TLT is above where I bought it... but of course we couldn't see history in front of us... you can only see history behind you. :-) This is very much like pair trading except we are not taking profits on the positions, we are just collecting dividends. IF I WERE pair trading this set up I would sell off enough shares of TLT to make the capital ratio .5 again and take the profit on those shares. en.wikipedia.org/wiki/Pairs_tradeBut we're not doing that... we're in it for the 'risk free' dividends and short call proceeds. As far as that goes... so far so good. |
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tyfighter3
Well-Known Member
Joined: Dec 20, 2010 13:01:17 GMT -5
Posts: 1,806
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Post by tyfighter3 on Feb 27, 2011 17:29:45 GMT -5
Dan, what is your time frame to do this in to get a good reading on it?
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Post by danshirley on Feb 28, 2011 8:27:34 GMT -5
Well... the goal is to evolve a strategy which provides a return substantially better than money market returns with the same level of safety.
To actually prove that out would mean at least a year... but I will track it weekly for a few more dividend cycles and probably revert to a monthly or even twice a year report.
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Post by danshirley on Mar 3, 2011 10:53:31 GMT -5
Another week (almost) later: TLT: +34 TBT: -152.25 Short calls: +104 Dividends: 64 TOT= 47.75 at 56 days TBT/TLT =.46 Total capital =26475 I am putting this up a day early because I have decided to stop the 'experiment' It's obvious that TBT has failed to track TLT and is drifting away to the down side. I have always been skeptical of these things and, of course, they are stated to track only for one day. finance.yahoo.com/q/pr?s=TBT+Profile'This investment seeks DAILY investment results...' So we were OK for a couple of weeks but you can't go much beyond that... and I'd be careful even at that. If I want to hold TLT and collect dividends I am better off using short calls to hedge the price of TLT. BUT short calls will be good only for relatively small moves in TLT and if there were really big moves then maybe TBT would seem of more use. If you look at the 1 year chart of TLT vs TBT: finance.yahoo.com/q/bc?s=TBT&t=1y&l=on&z=l&q=l&c=TLTAt the end of one year TLT is flat but TBT is down by almost 20%, and that's where it looks like it's headed for for us. OK.... experiment done. |
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Post by danshirley on Mar 8, 2011 11:14:37 GMT -5
If we hadn't used TBT at all:
TLT: -76
Short call: +128
Dividends: 123
TOT= 175 in 61 days
Total capital =17,979
Interim yield = 175/17979 = .0097 in 61 days or 5.8% annualized.
(not 'risk free')
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