Bonds for the small trader

K

Kicking

I would like to trade treasuries . I have used the CBOT contracts in the past for very short term trades but I would like to hold over night and build positions where I can average up and down.
Because of my account size I can't do that with the big contract I would be wiped out in no time.

I like the ability to trade overnight so the ETF's are not the best option I can't trade them until shortly before the New York open and in case of a big move overnight I would take larger than usual losses.

There used to be mini contracts for the 10 and 30 year , they ve been discontinued . I haven't looked at the exchange offerings, is there something similar currently offered ? It's hard to keep up with all the changes at these exchanges .

I am thinking about trading CFD's but what I read about one of the supposedly better broker , Saxobank, doesn't reassure me.
Alos experience trading gold with Oanda which is better than other broekrs tells me it's a losing proposition compared to GLD or YG because of the very large spread.

So what are my options ?

How about trading cash treasuries ? I could trade any size I want , right ? What issue is best to trade, the on the run I suppose but which one is that ? I don't think you can trade them outisde of regular hours, what about those electronic platforms ?

What about trading the 2 and 5 year futures instead?
Are those liquid overnight ? Not that I need it to trade but will my stop be executed near the stop price ?

I could also trade Schatz and BOBL instead for the smaller volatility and tick value but I can't seem to find good free historical data and charts anywhere and a chart package will probably be expensive for the amount of my trading in those products. I use Futuresource.com free charts which is eSignal data but there are no continuous contracts for example. Does IB offer historical data for Eurex, I believe their US futures charts are day session only and I use the electronic session charts.
 
All UST futures (2y, 3y, 5y, 10y and bond) are sufficiently liquid and tradable for your purposes. As to how you can trade cash bonds as a retail investor, I am not entirely sure.

Bund/bobl/schatz also work fine.
 
You can trade cash thru Espeed, BrokerTec, etc. Margin is very, very high so I doubt you would be able to trade it in size.....I only see 1M face trade on the screen there.

Advantage futures has the connection to BrokerTec if I recall correctly.

For historical data on Bobl, etc you might want to try CQG; they have awesome data on these issues but you will have to convert it into decimal form.
 
Quote from henderson:

You can trade cash thru Espeed, BrokerTec, etc. Margin is very, very high so I doubt you would be able to trade it in size.....I only see 1M face trade on the screen there.

Advantage futures has the connection to BrokerTec if I recall correctly.

For historical data on Bobl, etc you might want to try CQG; they have awesome data on these issues but you will have to convert it into decimal form.
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you must have misread the thread title. Isn't eSpeed for institutions ? If i trade cash it would be through IB , not sure if they link to different platforms and if they are open overnight or close to 24 hours a day. Also CQG is for institutional starting at $600/ mo.
 
From what i've read you are totally undercapitalised. Just paper trade until you've got a respectable account that will actaully allow you to trade something.
 
I am not sure how IB works but CQG isn't just for institutional users let me assure you of that. I imagine IB connects to Espeed and BrokerTec anyways.

If you are going to trade futures heavily you might consider a brokerage that specializes in futures; not knocking IB but if you have a tail on your cash issue that you need to swap out then they are probably not going to help you as opposed to a futures/cash brokerage.
 
You'll need to confine yourself to the front end of the yield curve. So you can trade eurodollars, outright or as calendar spreads. Extremely liquid. They're based on the LIBOR. Not treasuries but just as good and low margins.

Fed funds futures also have low margins.

If three year note futures ever catch on you could spread them against 10yr notes -- interesting trades. The major spread is two versus ten year maturities but they require many contracts.

Otherwise you can buy or spread 10 and 30 yr options. Also eurodollar options are extremely liquid and if you buy far out you'll have slower time decay.
T-bond options can be a little crazy. I'd suggest that you focus on eurodollars.
 
Quote from Halal Burger:

From what i've read you are totally undercapitalised. Just paper trade until you've got a respectable account that will actaully allow you to trade something.
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I don't know what you call undercapitalized, I don't think I am, compared to the average retail trader . The thing is if you trade over several days, and scale in and out thus with several contracts, you are carrying positions with a notional of a multiple of 100K. In my book and with my risk management you need between 100 and 200K to do it because overnight I don't go over 5:1 leverage, rarely over 3:1. I risk 1.5% to 2%max per trade, sometimes I will keep adding or wait it out if I feel it will turn around. Obviously with 3:1 or even 2:1 in the current environment this can be a bad idea. So that's why I feel the bond futures contracts are too big.


Thanks fo the suggestion to trade spreads but I am close to a 100% technical trader, trade outright and don't want to do yield curve plays.
I don't feel I have the extensive fixed income background to do that, plus there is the information cost. You need a Bloombeg machine to do that .
 
Quote from Kicking:

I don't know what you call undercapitalized, I don't think I am, compared to the average retail trader . The thing is if you trade over several days, and scale in and out thus with several contracts, you are carrying positions with a notional of a multiple of 100K. In my book and with my risk management you need between 100 and 200K to do it because overnight I don't go over 5:1 leverage, rarely over 3:1. I risk 1.5% to 2%max per trade, sometimes I will keep adding or wait it out if I feel it will turn around. Obviously with 3:1 or even 2:1 in the current environment this can be a bad idea. So that's why I feel the bond futures contracts are too big.


Thanks fo the suggestion to trade spreads but I am close to a 100% technical trader, trade outright and don't want to do yield curve plays.
I don't feel I have the extensive fixed income background to do that, plus there is the information cost. You need a Bloombeg machine to do that .
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I'm not quite sure what you mean but...
If you want to trade 10-years and you don't want more than 2:1 leverage overnight you need at least 50K just to hold 1 contract and abide by your rules.
 
Quote from Kicking:

In my book and with my risk management you need between 100 and 200K to do it because overnight I don't go over 5:1 leverage, rarely over 3:1.
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Notional value is misleading. T-bond futures have a 100K notional and can move a lot. Eurodollar futures have a 1Million notional value but are far slower and more tame.

You're better off I believe looking at margin requirement as a gauge of risk; otherwise look at the largest moves from the past.

Eurodollar maintenance margins are $850 currently. Maybe we can think therefore the CME believes eurodollars won't make more than an $850 move in one day.

T-bond maintenance, despite being one tenth the size in notional terms, is $3,200.

So notional values are really going to mislead in futures. But even in stocks, I mean $100K of a penny stock is obviously far more risk than $100K of a blue chip consumer staples name.

2 yr note margins are $800 (basically the longer the maturity the higher the margin), so that's your best bet for treasuries per se.
 
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