Price Forecast:

Bullish Case: The SHY's implied volatility is decreasing, indicating potential for price stability and recovery towards historical levels around $85 given favorable market conditions and sustained interest rates.

Bearish Case: Heightened implied volatility and historical sell-off patterns suggest significant downside risk, with a possible drop toward the $78 level if economic conditions worsen and investor sentiment shifts.

Potential Outcomes:

• Recovery to $85 (40% probability) driven by market stabilization.
• Decline to $78 (30% probability) due to increased bearish sentiment.
• Flat trading between $81-$84 (30% probability) as market consolidates.

Trading Oracle: Consider initiating a bullish debit spread by buying $81 calls and selling $83 calls. This strategy takes advantage of potential upward movements while capping risk exposure. Given current high implied volatility and flat term structure, targeting early 2025 could maximize profit opportunities with a favorable risk-reward ratio.

November 23, 2024