Offsetting price risk

L

lasner

I currently trade on 100k. I typically like to purchase 100k worth of notes and then trade against them.

1 year notes yield nothing right now. 30 year bonds yield close to 5%. I want to put all of it in 30 bonds but then I have to worry about price risk if I want to exit.

Anyone have any inexpensive good ways to hedge the price risk?
 
Quote from lasner:
----100k.
----I typically like to purchase 100k worth of notes and then trade against them.
----30-year bonds yield close to 5%.
----I want to put all of it in bonds....
----I have to worry about price risk if I want to exit.
----inexpensive and good ways to hedge the price risk?
More...
1) You could simply "hedge" with other futures, options or ETF's. :)
2) Instead of owning treasury securities and "trading against" them, you could merely keep your account in cash and use option credit-spreads to generate "interest" that you could earn otherwise. :cool:
3) Is it worth it for you to buy treasuries with your account size as it is? :confused:
 
Quote from nazzdack:


2) Instead of owning treasury securities and "trading against" them, you could merely keep your account in cash and use option credit-spreads to generate "interest" that you could earn otherwise. :cool:
More...

How much safety is there in this? There is some risk in a credit spread though?
 
I guess I could purchase a 30 year bond. I would have to margin 9% of my account.

I would want to hedge the price risk so I would have to purchase put options on 30 year bonds. Or sell futures on 30 year bonds. When I margin a 30 year bond are there 30 year bond options or futures that will cover me??
 
I'm just looking for a way to go into a 30 year bond and cover my price risk.

I trade through Interactive Brokers. I called them and they told me that if I went into a 30 year bond on margin buying options to hedge is not the same thing??
 
If you hedge it perfectly you will end up with only the risk-free rate. If you want the 5% yield you have to take the risk of holding the long bond.
 
Quote from Traveler:

If you hedge it perfectly you will end up with only the risk-free rate. If you want the 5% yield you have to take the risk of holding the long bond.
More...

Thanks for the feedback...sorry but I'm a little confused on bonds. I can margin 9% of my account and trade against it. Can I also short futures contracts against the bond. I called my broker they told me no...that they were two different products???
 
You must log in or register to reply here.
Back
Top