$UBS Monthly Chart

I was curious to extend my inference that you sell the miners and buy the long bond, just to see how far back this trade might go. To my suprise, a case can be made that advances in the bond price meant a collapse in the stock price going back to at least 1997.

This surprising result says that traders have been making money in this trade since the collapse of Bre-X. So the company must become aware of this daunting form of competition, where traders can blithely sell the stock down and purchase options in the long bond markets.

Unless long bond rates become negative nominal rates, then the trade in the long bond, which has been in fashion like a good watch for years, and has provided practically risk free returns since that time, could go out of vogue.

The reason is that long bond prices are going to have a hard time maintaining the lowest possible rates in history. The Fed can purchase the bonds, but will not be able to make this market continue on its growth trajectory and just maintain a price at best. So likely traders will see the immediate outcome of a moribund trade.

But the company itself must wait until the long bond sells off before releasing any news, because it just firing blanks and wasting precious information uselessly. As a shareholder, I feel trapped with my shares, because the simple solution would have been to buy the March Put contract on the Long Bond, but those puts are now worth many times their original price.

The strike prices can be taken from moving averages on either the weekly or monthly chart. You'll find those prices have been bid up, especially the nearer the moving average is to the closing price.

http://quotes.ino.com/options/?s=CBOT_ZB.H12.E

supersize: http://www.flickr.com/photos/11747277@N07/6551488807/sizes/l/in/photostream/

stockcharts.com

-F6