2 Comments

  1. LoveOfProfit
    May 12, 2020 @ 3:56 pm

    A large part of the bond returns over recent years has been an environment of ever-decreasing rates. Given that we’re at 0, and assuming we won’t go below (or much below) to negative rate territory (possibly a dangerous assumption), TLT won’t continue to have such fantastic returns, full stop. Similarly, leverages short put plays will not be as slam-dunk. That said, I expect unleveraged short put option strategies to perform well in a more sideways environment as debt and debt service increases and our desire to raise rates continues to remain deflated.

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    • James
      June 17, 2020 @ 1:41 pm

      I think it would be interesting for Spintwig to reverse the prices of TLT and then do this backtest again. (IE, the most recent price becomes the first price; the first price becomes the most recent.) This might help simulate how this strategy would perform in a rising rates environment. I suspect that some OTM short puts would still be profitable.

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