Straddle buy signal on 10 Yr Note

Congestion has been building for the December 2015 10-Year US Treasury Note and James Dima, technical analyst at Marex Spectron, says an at the money straddle will be a good way to trade the eventual breakout.

Dima notes that the Bollinger Bands (red lines) are at an historically narrow width and that when this occurs it typically signifies that a market is about to break from its current trading range (see Chart). The last time this happened was on 24 April. Within a week, that straddle appreciated over 20% in premium value from the original purchase price. One way to trade this current congestion, Dima says, is to buy an at the money straddle with 4 to 6 weeks of time.

See Chart.