Bonds have been a bit squirrely lately as the financials have surged so here’s a quick look at recent activity one of our most reliable pair trades – XLF/TLT. As of today’s close we are flat both positions. Note the last trade of record…a substantial loser which was easily avoided by simply following the fixed exit rule at 6 days (N=5 +1 day). Such an exit would have turned a 24% loser into a 4.5% winner and produced a revised Total return =100.25%. We had a similar situation on the 11/9 to 11/30 trade when the 6 day excursion exit was violated although the loss was minimal. As with any short term directional trading strategy it’s important to follow the defined exit rules.
