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Bullish Case: If economic recovery significantly outpaces expectations, SJB may rise as high-yield bonds improve. Increased investor confidence in the market could elevate SJB's price, supported by a historical trend of positive returns in short time frames.

Bearish Case: Continued economic uncertainty and high inflation could lead to further bond defaults, reducing SJB's attractiveness. If the market shifts towards risk-on sentiment, SJB could drop as investors flee from safe havens, reflecting its historical declines.

Potential Outcomes:

1. Strong economic recovery (30%);

2. Higher inflation and defaults (40%);

3. Market shifts to risk-on (20%);

4. Major geopolitical events (10%). These probabilities derive from current economic data and historical trends in bond performance.

Trading Oracle: Consider a debit spread with SJB puts (e.g., SJB 09/20/2024 15.00 P) as implied volatility is high, which suggests potential for further downside. This strategy takes advantage of potential downturns and mitigates risk while positioning for a bullish reversal.

August 24, 2024