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This discrepancy isn't an "arb", either...

Well done, aSus... It was a mad mad day, but definitely ended on a high note for me, so I can complain. Still very hectic and, who knows, we might have more of the same on Monday, despite the bank holiday.

Let me contribute here for the last time, if I may... I am with bone here, 'cause, regardless of whether I agree with him, what he says makes sense, even though he's a bit too aggressive for my taste. Firstly, Big D, well done so far on your short. It's not a trade I like, as I mentioned...

"Arbitrage" is such an abused word... You can't "arbitrage" these things, unless you do your own funding in the mkt.

tj, you really have to stop beating this dead horse... Would you like me to try answering your questions, just to put this to bed, even though I don't teach anything?

I was going to say that, judging by what's been happening in market, you're gonna need it :).

Ha-ha, good luck, dude...

Yeah, I know. While the theoretical downside can be just as painful, if you have enough cushion, you can make it sufficiently distant to allow you to hold on without excessive clenching of buttocks. Still, as I mentioned in another thread, I ain't never going short gamma. I can find much more...

These are all funding games, if you wanna play them properly.

I call those things call ladders, bone (although, to be fair, I refer to all same expiry options), and I once had a close shave on one of 'em (it was in the bobl during one of the Dubai episodes). The experience left my psyche permanently scarred and I swore to never ever do crap like that ever...

A profit is a profit is a profit... Flatteners are a gift that keeps on giving, but you have to pay the negative carry. The trick is finding the right curves and the right places on these curves, such that the risk/reward is good enough to justify the carry. In concise summary, that's why...

Firstly, Montier is a really good guy. Secondly, the divs trade has been in the works for a few months now. I first heard it mentioned by an equity guy at a round table in May (unfort, I can't do juicy things like these). Finally, the deflation trades similar to what Fairfax has been putting...

All depends... If you want to understand how things work, yes, they're probably harder. If you just wanna punt, they might be actually easier.

The reason the 2s "outperformed" the 10s is because the curve flattened. It has absolutely nothing to do with the distribution of spec/real money in these contracts. 2s10s in cash USTs went from 220bps to 200bps in the past two weeks. That's what happens to curves in deflationary times: front...

Yep, all sorts of downside being bought in Dec10 dollars, so Dec10 LIBOR/OIS is arnd 6bps wider on the day. Everyone scared, although nobody knows what of (all sorts of funny rumors abound). Especially, given that the LIBOR fixing has been going down steadily.

Hmmm, this is what I do... Except I don't pray and there is a stop. It happens when I conclude that the premise behind the original trade is flawed.

Well, that's macro for you...

For the record (as mentioned before in another thread), I believe bone is perfectly legit. While I am not one of his clients and I haven't done any due diligence, what he says and how he says it suggests to me that his background and track record are, in fact, as he states.

Just more tough talk...

The Japanese have never promised to intervene. Not at 85, not at 84, nowhere. Moreover, they have probably looked at the SNB interventions earlier this year and maybe decided to wait and see, rather than waste money in what might end up as an ultimately futile and costly gesture.