When I was first introduced to futures markets I was told that bond futures are confusing. I've avoided them ever since then. I've also ran across several seasoned commodity traders that say the same thing. I want to face my fear of bonds so I need a good explanation of the mechanics of the market. Got one? (not looking for market analysis/trade recommendations)
Good explanation of bond futures?
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Just now, you talked about rice. Now bond. What's next?
I have exactly the same template for
index, metal, energy, agriculture, animal, currency, bond, cryptocurrency .... futures.
I'd avoid trading food futures (rice, soya, coffee, orange ......) due to its tiny day range.
Farmers, calendar spread swing traders ... like to trade those things.
I have exactly the same template for
index, metal, energy, agriculture, animal, currency, bond, cryptocurrency .... futures.
I'd avoid trading food futures (rice, soya, coffee, orange ......) due to its tiny day range.
Farmers, calendar spread swing traders ... like to trade those things.
Go through the CME group materials. They have plenty of documentation there on how their products work.
https://www.cmegroup.com/education.html
https://www.cmegroup.com/education.html
I’ve traded most every market there is except bonds and crypto. My trading strategies are different for every one of them.
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Not like stock futures? You agree to buy (or sell) that bond at a future date?
What's confusing about it? The cash market is by far the hardest thing here. Calculating the implied yield, implied repo, CTD yield and yield to maturity, CTD forward yield, etc. Also, how the Eurodollar market is involved is another big question mark for me.
Maybe read this link
https://quant.stackexchange.com/que...-calculate-yield-from-a-bond-futures-contract
You can pretty easily figure out ratios for ETFs from the price data, and the rate spreads are really good for keeping an eye on the ICS market. This market is all about spreads -- rate spreads hedge yield spreads, and rate butterflies are used by market makers...
This is the mother of all rabbit holes, though, so I don't disagree that it's confusing.
Maybe read this link
https://quant.stackexchange.com/que...-calculate-yield-from-a-bond-futures-contract
You can pretty easily figure out ratios for ETFs from the price data, and the rate spreads are really good for keeping an eye on the ICS market. This market is all about spreads -- rate spreads hedge yield spreads, and rate butterflies are used by market makers...
This is the mother of all rabbit holes, though, so I don't disagree that it's confusing.
I seem to remember someone telling me that if I bought at 105 and the price goes to 110, I would be down 5. I never thought about bonds again.
That someone was talking about something else, or did not know what he/she was talking about re bond futures, stat.
CME futures are very straight forward. You buy at a level. If it you buy at 110 and it goes to 105 and you sell, you lose 5 points.
If you buy at 110 and it goes to 115 and you sell, you make 5 points. So easy, a caveman can do it.
It couldn't be more straightforward in terms of what the contract is worth. Every contract has a multiplier and a price, and it goes up and down with the value of the underlying.
The value of a bond, bill, or note rises and falls inversely to yields. So, a rate future hedges interest rate risk for holders of treasury securities, just like an index future hedges market risk (BETA) for stock holders.
You have to look up the contract specs, here.
https://www.cmegroup.com/markets/in...ry/2-year-us-treasury-note.contractSpecs.html
https://www.cmegroup.com/markets/in...y/30-year-us-treasury-bond.contractSpecs.html
and so on...
They all have different tick values and multipliers, but they behave exactly like a cash settled index future in terms of function.
Stock holders sell index futures against their holdings, and bold holders sell rate futures to hedge their market risk.
The value of a bond, bill, or note rises and falls inversely to yields. So, a rate future hedges interest rate risk for holders of treasury securities, just like an index future hedges market risk (BETA) for stock holders.
You have to look up the contract specs, here.
https://www.cmegroup.com/markets/in...ry/2-year-us-treasury-note.contractSpecs.html
https://www.cmegroup.com/markets/in...y/30-year-us-treasury-bond.contractSpecs.html
and so on...
They all have different tick values and multipliers, but they behave exactly like a cash settled index future in terms of function.
Stock holders sell index futures against their holdings, and bold holders sell rate futures to hedge their market risk.
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I believe you guys but I’m still apprehensive. First impressions are for real. I’m just going to have to get a contract and watch my equity fluctuate. Maybe that will break my thought pattern….