Bond Futures

I agree 100%.

nitro
Quote from trade-ya:

...However, I strongly believe that this concept of "letting it ride" is inconsistent with cutting losses quickly. The way it should work in practice is as follows: you start with $100,000 in capital, you utilize a 10% ultimate stop loss on your capital, thus risking $10,000. You instead make $50,000 on your money bringing your total capital to $150,000. Now, you continue to utilize a 10% ultimate stop loss on your capital, however, you are now able to risk $15,000. I think this is an important concept.
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I know that you are talking about the 30 year bond, but it might be best to state it as it might lead to confusion.

BTW, any reason people only talk about the 30 and not the 10?

nitro
Quote from spreadem:

Sept Bond overnight lows at 111'03 have triggered some buying but the wind has been taken out of the bond bulls. I don't see any rallies continuing higher than 115 area.
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In this case, I was referring to the 30 year bond, however, I think that the basic concepts of risk management apply across all products and instruments.

I believe that when people refer to the 30 year bond, they are really referring to the so-called 30-year bond future or USU3 (front month). Actually, the 30-year bond future has a duration closer to 10 years. I do not believe that there is a future on the 10-year bond, and even if their is, it is much less liquid than the 30-year bond future.

Best. Neal.
 
Quote from trade-ya:

In this case, I was referring to the 30 year bond, however, I think that the basic concepts of risk management apply across all products and instruments.

I believe that when people refer to the 30 year bond, they are really referring to the so-called 30-year bond future or USU3 (front month). Actually, the 30-year bond future has a duration closer to 10 years. I do not believe that there is a future on the 10-year bond, and even if their is, it is much less liquid than the 30-year bond future.

Best. Neal.
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Nearly double the volume goes to the 10 year note futures contract compared to the 30 year. 10 year is the benchmark and replaced 30 year when the treasury stopped issuing 30 year bonds. Even the 5 year note futures contract has more volume than the 30 year.

I guess these guys like the 30 year because it has larger moves, is more volatile, trades in 1/32 instead of .5/32 like the notes, etc..
 
I think it is important for bond traders to always remember the general rule about the relationship between interest rates, maturity and volatility..

Here is the rule: " ...As interest rates move, bond prices do not move by equal amounts, The longer a bond's maturity, the faster the bond's price will move in response to interest rate changes. This is due to the compounding effect of interest rates on the bond's value..."

So, longer maturity = greater volatility, shorter maturity = lower volatility...

Those who studied for series 7 probably remember the above! :D
 
Quote from McCloud:

I think it is important for bond traders to always remember the general rule about the relationship between interest rates, maturity and volatility..
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I don't think it's the Bond traders that need to remember that.:)
 
Quote from spreadem:

Sept Bonds are still trading in a range of approx 111 to 113 for the last 3 days. Given that the bonds are very oversold, the likelihood is that we may see trading above 113 next week.

Short sellers should be looking at ways to hedge or cover short positions if bond prices should run up to 113, 114 or even 115.

I've employed a strategy of combining my futures position with an option position which results in a hedge to protect from profit erosion.

Any ideas for short hedges?
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You're still trying to outthink this Bond move aren't you? :)

This a gift from the trading gods. Take it.


Dr. Zhivodka
 
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