Editor's Note: We wanted to give you a heads up on what today's markets are doing to bonds right now. There's a change that's opening up opportunity - in fact, Shah's Short-Side Fortunes readers just took down a cool 175% in gains in a week on this bond play. And, since this move could very well have several more "bouts" of triple-digit gains, he wanted us to get this out to Money Morning so our Members could make this move today. Get ready for what's likely to be a very profitable ride. Here's Shah...
There's no stopping the madness of crowds, and that can be quite rewarding for us.
Equity markets are acting like "nothing matters and what if it did?" That's flat-out dangerous for buy-and-hold investors, but it's already proven very profitable for nimble traders like us.
It doesn't seem to bother rabid bulls that GAAP earnings on the S&P 500 are $86 and the benchmark at 2,164 means the average is trading at a terrifying, nose-bleeding 25 times earnings.
Nope, they just keep on buying.
It's frankly insane.
But that's not our worry right now. Our job is to ride the gravy train wherever it's going.
Check out this easy move...
We saw the rally last week and correctly bet it would continue robustly this week. And we figured correctly that a stock market rally would take some of the steam out of the bond market rally.
Well, my charts say the next week looks likely to be a carbon copy of this one, with no end in sight to the buying.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
That's going to put even more pressure on bonds, and it's very likely to give us another triple-digit win in short order as we use leverage to get the absolute most out of the situation.
So here's what I want you to do; it's a move that's treated me very well when markets get overbought and bonds get some wind taken out of their sails.
Sell short the iShares Barclays 20+ Yr Treasury Bond ETF (Nasdaq: TLT) down to $134. You could see a nice gain by the end of the week of July 18.
But the serious profits are likely to come from late August/early September-dated in-the-money puts on TLT. For instance, my paid readers just bought TLT August 19 $133 puts (TLT160819P00133000) for $0.24 and sold them for $0.66, or a 175% gain.
These crazy go-higher markets look set to deliver those kinds of profits again. And again.
This is your chance to get out in front of those profits.
More in Fixed Income
Put on These Trades When the Bond Market Enters Freefall
More in Stocks
We Love These Top Five Double-Digit Dividend Paying Companies
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.