TBT

I charted 4 key directions at the beginning of this year which I deemed very high probability of success.

1. Gold will go up and surpassed $1000/-
2. Bullish on oil. Oil was < $40 at that time.
3. US$ will weaken. My favorite currency is Canadian dollar.
4. Interest rate will go up and there will be inflation instead of deflation. Therefore, I bought TBT which is a short of the 30 years Lehman Brothers treasury.

So far, the first 3 directions were wildly correct. This is one year that I had many >100 gains on my trades. Living in Canada, I sold huge amount of US$ for CD$ in March.

I stated that CD$ will reach parity by the end of the year. Looks like it is going to be a reality now.

However, I have only a slight profit on TBT. It is not going in my direction.

What am I doing with my TBT position?

I am still bullish!

I believe that TBT will go up eventually. It is currently not moving up because:

1. Treasury yield is being held artificially low by the government. There is manipulation. I do not believe that countries like China, Japan and Middle East will continue to buy from the US government at this yield. The government is buying back a lot of the treasury.

2. It is assumed now that TBT is low because there is still a flight to safety by investing in long term treasuries. I believe very soon investor will pull out money from the treasury for fear of dollar decline and better investment opportunities elsewhere.. This will force Treasury to increase rates.

3. This week, Australia was the first country to increase interest rates. This is the first country to fire off a rate increase. More will come as countries faces inflationary pressure.

I will continue take the bias that after so much money pumped into the system, there is no way for interest rates to go but up.

Thus it is good time to buy more TBT.

Currently, I have a naked OCT Put 45 for TBT. If it is assigned, my position size is doubled. I have take ownership of the stock and collar it. If it is not assigned, my cost basis is reduced as I will be keeping the credit.

For my current position, I have a PP. Although I am bullish, I still protect my position. I will continue to sell call to reduce cost.

At the right moment, I will sell my put and ride it on the way up.

TBT could be one of the best trades I ever made!