My limit order filled.

music selection:  “Emotion” — Samantha Sang

Some time ago, I set a good till canceled limit order on the L Brands 6.875 coupon 1NOV2035 maturity bond (CUSIP: 501797AL8).  I got my fill on the 3rd at 85 cents on the dollar.  I’ve traded around this bond before buying at 85 and selling at 95.  This can be a very lucrative strategy on a bond that is both money good and range bound.

My current yield to maturity is 7.88%.  That is a fair reward for parking money in a safe and liquid asset.  But I can do a lot better.  Say it takes two  years for the bond to rally to my target exit point of 95 cents on the dollar.  The yield jumps to 16.91%.  That is a stellar return for a safe asset.  Last time, I held the bond for a little less than 4 months.  That annualized return was over 66%.  I’m running a similar strategy with the AFSI bond (CUSIP: 032359AE1).  I have bought before at 95 and sold a little over 99.  I still have 1,000 dollars face in that bond (can’t sell because minimum lot size is 2 bonds).  So I’m waiting for a good till canceled order to fill again at 95.  I’ll keep flipping this bond as many times as the market offers up an opportunity.

I’ll note that in my opinion, Interactive Brokers is the best place to trade bonds.  You can enter the CUSIP number directly into the interface and do not need to call a bond desk.  You can trade (usually), with a minimum lot size of 2.  And you can place good till canceled orders.  The commissions are super low as well.

ACTION TO TAKE: Buy CUSIP 50179AL8 up to 85.  Place a good till canceled limit order at 95 once you get a fill.