In mid-day trading action on Tuesday we are seeing most markets sharply lower. In my opinion, this is due to not only investor angst over the Goldman Sachs hearings today, but also the credit ratings of Greece and Portugal being downgraded by Standard and Poor's.

It seems to me that investors are becoming more and more fearful of defaults by European nations. This appears to be causing investors to shed risk today. Because of this, I am seeing bonds and notes sharply higher as well as the greenback.

The 30-year Treasury bond is trading near the top of its recent trading range. In my opinion, I think we could see it retreat in coming sessions. I feel there is too much supply in the marketplace right now, and that the Fed is getting closer to tightening credit.

The market in my view has done an excellent job in recent months of sweeping bad news under the rug so to speak. Time will tell if this proves to be the case following today's news. I do feel we could see things calm down a bit in the coming sessions. Here is a way to try to take advantage of a drop in volatility and a retreat in bond prices should it occur.

Sell the June Treasury bond 120 call option for a premium of $468.75 or better. Assuming commissions and fees of $50 per contract, this would leave the investor with a net premium collected of $$418.75. This position profits if at expiration the June futures contract is at or below the strike price plus the premium collected.

In this case, that means that at expiration the position breaks even if the June bond futures contract is at 118'26. , and it profits if the contract is below that price. The risk on this position is unlimited. An investor can lose if the June futures contract is above the breakeven of 118'26 at or any time prior to expiration.

This is a marginable position, and therefore an investor can also lose money if the market makes an adverse move prior to expiration generating a margin call and the investor is forced to close the position. The position value can fluctuate very rapidly and at times experience wild swings and therfore an investor may also close the position with a loss prior to expiration without a margin call.

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