Treasury movements, upcoming Fed events, and economic reports indicate in my opinion that the 5yr yield will pull back from the current 2.74% yield as of this writing to 2.57% yield. The MARCH 2019 5yr note trading 113.14 as of this writing can potentially move higher toward the 114.25 area and possibly 115.12 area in my opinion. The nonfarm payroll report today showing a 155,000 gain is lower than the 200,000 estimate economists had been looking for and housing numbers have stalled. The Fed meets December 18/19th will potentially hike the FED FUND rate and then indicate a wait and see approach(which they have already). In my view the Fed will potentially only move rates higher 2 times instead of 3 in 2019.
I see the MARCH 5yr note future as an opportunity for one to buy at 113.14.Use a stop loss risking approxiamtely $500 with a stop at 112.31. Im targeting the 114.25 area using a two target strategy with the second level or target at 115.12 in my opinion.
Option strategies to consider are the FEBRUARY 114.5 Call cost 8.5/64ths = $132.81 of quantifiable risk plus fees and associated costs per transaction to enter the trade or the FEBRUARY 115 Call cost 4.5/64ths = $70.31 of quantifiable risk plus fees and associated costs per transaction to enter the trade. To give some downside protection the FEBRUARY 113 Put cost 13/64ths = $203.13 of quantifiable risk plus fees and associated costs per transaction to enter the trade or the FEBRUARY 112.5 Put cost 4.5/64ths = $70.31 of quantifiable risk plus fees and associated costs per transaction to enter the trade.
49 DAYS TO FEBRUARY EXPIRATION 1/25/2019
THE MARCH 10Y NOTE IS THE UNDERLYING FUTURE
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