The recent 4 ½ point jump in the US Treasury bond market has just given us another chance at the brass ring.

Except that this time, it’s different.

Now we have a technical picture that is also setting up an almost perfect head and should top on the charts.

How would you like to get some free lottery tickets?

Except that these are better than lottery tickets.

Instead of a one in a million chance of winning some substantial dough, the odds of a big payoff are more like 90:10.

Have I piqued your interest? Are you ready to take a flier? Do you feel like rolling the dice?

And here’s another come-on.

The last time I recommended this exact trade in August followers earned an eye-popping 50% return on capital in only four weeks!

It’s really quite simple.

This morning, the yield on the ten-year Treasury bond briefly touched 2.29%, a new three month low.

Let’s say that’s the low for the year, and that yields rise from here for the next four months, pummeling the bond market.

This would be a fabulous time to buy a long dated (TLT) March 2018 $123-$125 out-of the-money vertical bear put spread at $1.00.

If bond yields back up to 2.45% where they were two weeks ago and shave five points off the (TLT) from today’s levels, this spread would expire at its maximum theoretical value at $2.00 on March 16, 2018.

The profit on a $10,000 investment would amount to (100 contracts X 100 shares per option X $1.00), or $10,000, giving you a four-month gain of 100%.

Not bad in this yield deprived world.

Please see the screen shot from my Interactive Brokers platform to see how to set up this position. 

Now let’s say you have a prodigious appetite for risk and want to spend some of the massive profits you earned following the Diary of a Mad Hedge Fund Trader in recent months.

Let’s say that you are willing to bet that bond yield are likely to back all the way up to the 2.62% where they traded in March.

In that case, you want to buy the (TLT) March 2018 $116-$118 deep out of-the-money vertical bear put spread at $0.28.

If you are correct, and bond yields back up to a lofty 2.62% and cut 11 points off the (TLT) from today’s levels, this spread would expire at its maximum theoretical value of $2.00 on March 16, 2018.

The profit on a $10,000 investment would amount to (356 contracts X 100 shares per option X $1.72), or $61,232, giving you a four-month gain of 512.32%.

Please see the screen shot from my Interactive Brokers platform to see how to set up this much more aggressive high-risk position.

If you add either one of these super aggressive positions you are making a number of different bets.

1) The global synchronized economic recovery continues.

2) Jerome Powell, the next Fed governor, will continue with Janet Yellen’s policy of raising interest rates 25 basis points per quarter.

3) Pernicious deflation moderates, thanks to the large scale recovery spending wrought by Hurricanes Harvey in Texas and Irma in Florida and the fires in Northern California.

4) Some kind of tax cut gets passed by congress within the next four months, no matter how modest.

These may not be bets that you are willing to make with your own hard earned cash.

But if they are, the potential payoff is enormous, a lot like winning the lottery.
 
I am not necessarily saying this is going to happen with any certainty.

Nevermind that every financial guru out there, including Warren Buffet, Ray Dalio, David Tepper, and George Soros agree with me and argue vociferously that bonds are wildly over priced, at a bubble top, and long overdue for a huge fall.

So far, they have all been wrong, including me.

I’m just sayin….