TBT

It's been a long time since I've given financial advice.

Probably because I've cut back my day trading to swing trading and am making such small plays that my heart isn't completely in it. Ever since the crash and rebound I've gone through some unsteady financial times myself (losing my job mainly) so I didn't feel like I had the ability to play big - really put some "dry powder" to work in something I believed in.

Also, believe it or not, there are people out there that actually read my blog for the finance/market aspect of it. They've told me personally. Shocker, I know.

Anyway, on to my idea.

TBT is the...well...I think if I explained it your eyes might start to gloss over. So you can gloss over the description here (from Google Finance/Reuters):
"ProShares UltraShort 20+ Year Treasury (the Fund), formerly ProShares UltraShort Lehman 20+ Year Treasury, seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index (the Index). The Index includes all publicly issued, the United States Treasury securities that have a remaining maturity greater than 20 years, are non-convertible, are denominated in United States dollars, are rated investment grade (at least Baa3 by Moody's Investors Service or BBB- by Standard & Poor's (S&P)), are fixed rate, and have more than $250 million par outstanding. The Index is weighted by the relative market value of all securities meeting the Index criteria. The Fund takes positions in securities and/or financial instruments that, in combination, should have similar daily return characteristics as –200% of the daily return of the Index. The Fund’s investment advisor is ProShare Advisors LLC."

You can learn more about it here.

In my words (and again, I by no means am a professional in this area), as yield prices on the 20 year bonds rise, prices go down. Therefore, a double short on the price of 20 year bonds will go up - in this situation, double.

So why would I buy this?

The market will demand higher rates in the coming months. Rates have been "historically low" for too long. Pretty soon with all of the printing of money from the stimulus inflation will be coming. Sure, inflation has been stagnant for now, but once the economy starts to turn a little (and it already is - how far we turn is an entirely different post) we're going to start tightening rates again.

The Fed can give us as much lip service as they want to keep this government-stimulated rally alive - but as standard - actions speak louder. Bernanke has told us that rates won't rise until "sometime next year". For those of that haven't noticed, "next year" is less than 40 days away. Kind of scary, I know.

As long the market doesn't crash again in to a double dip recession, and we avoid all other disasters (major earthquake/fires/floods/terrorist attacks) I can see the economy stabilizing slowly - and the rates starting to make a come back.

Meaning TBT only has one place to go from here - up. I've waited on this for a few months - I got others in to it at $43. But I finally pulled the trigger yesterday and bought some March $47 calls for under $2/contract. Now I'll just continue to build my position between now and early February and watch the money roll in.

Price target for TBT: $58 (35% return if you buy the ETF at $45, I'm looking for roughly 600% return on my option).
Target Date: 2/18/2010
Price release point: $39 (-15% for the ETF, date dependent percentage loss on the option).

For those of you that have questions on this play, please let me know. I love to talk money with those as interested in making it as I am.