Most Aggressive Inflation Trade

Discussion in 'Trading' started by hedgez, Nov 9, 2010.

  1. hedgez


    When a cancer patient is sick, you can pump them full of medicine to mask the underlying problem... similarly, when the economy is about to implode, you can pump it full of stimulis and print a heck of a lot of money to mask the problem. The issue at hand is, what's the consequence of these actions? Furthermore, how long until the medicine stops working? Once the medicine stops working, what's next? More medicine, a cure, or another catastrophe?

    In my opinion, and I'm sure I'm not alone, the economy is heading fast forward into another catastrophe in the form of rampant inflation and steep declines in the dollar.

    So.... how do you take advantage of this crystal ball?

    Do you simply buy LEAPs Puts on TLT?

    Without being an institutional investor what is the MOST AGGRESSIVE option bet to make that within 5 years the 10 year or 30 year Treasury will rise above a certain threshold???

    Any help or advice would be VERY much appreciated!
  2. drcha


    How about some OTM calls on gold?
  3. hedgez


  4. Did you post in the options thread as well?

    I responded there. Main point is that I believe you are likely wrong, because dollar is rising.
  5. hedgez


    Well, I'm not really asking if someone agrees or disagrees. I'm really just asking what kind of trade someone would put on to make an aggressive bet if you think, let's say, the fed funds rate were to increase 300 bps over the next 2-3 years... in other words, if you wanted to place a relatively small bet, knowing you could lose 100% of that bet, but with the possiblity of signicant outsized returns... how would you go about it? Julian Robertson is talking about making 20-30 times his investment on a yield steepner play, albiet the article is dated. In my opinion, the odds of a significant rise in inflation are more like 2:1, not 20 or 30:1. It just seems like a good RISKY bet, but I'm just researching what's the best way to go about it. So if anyone has any advice, please let me know.

    Going back to what I initially said, I truly believe there has to be CONSEQUENCES for all the fed stimulis and essentially printing of dollars. The fed has kept an artificial lid on interest rates. You can only keep the steam inside a pot so long until the top blows off with a major force!