Shorting Bonds - Question

Palindrome · Jul 27, 2016

If you wanted to short the 30 year bond, would you get long TBT, or short TLT?

I don't think I want to play this through futures, and I don't want to through options. Any suggestions as to an efficient way to take a position in this for a couple months?

TradeCat · Jul 27, 2016

Good job on identifying that the risk on leveraged instruments is too much for this trade.

1245 · Jul 27, 2016

Palindrome said:
If you wanted to short the 30 year bond, would you get long TBT, or short TLT?

I don't think I want to play this through futures, and I don't want to through options. Any suggestions as to an efficient way to take a position in this for a couple months?

Why not futures or options on futures? A better pure play and better tax benefits if you are in the USA.

Palindrome · Jul 27, 2016

I thought about it, but I don't want the full leverage of even 1 contract. I think for my size account and my risk tolerance I would rather smaller size than 1 full contract. I think I could stomach a half a contract. I guess my only options are TLT or TBT, but that is why I am asking I guess.

BONECRUSHER · Jul 27, 2016

Palindrome said:
If you wanted to short the 30 year bond, would you get long TBT, or short TLT?

I don't think I want to play this through futures, and I don't want to through options. Any suggestions as to an efficient way to take a position in this for a couple months?

Long TBT or short TLT would both work. Probably get more "shares" using TBT because market is so high now with TLT, therefore TBT should be much lower in price. I don't think TBT has much of a tracking error...check to make sure. FWIW I trade the 30 YR. futures daily. GOOD LUCK!

drcha · Jul 28, 2016

You can also sell a very deep in the money put. For example, at this moment, I see that the September 2016 155 contract is $15.80, so the time value in this put is only about $0.64. You can reap the benefits of 100 short shares of TLT with a small expenditure, no margin, and limited risk.

drcha · Jul 28, 2016

Ack, sorry, I mean BUY the put, not sell it...

Palindrome · Jul 28, 2016

Thats' a great idea, pay only a small amount of time value.

zdreg · Jul 28, 2016

BONECRUSHER said:
TBT has much of a tracking error.

i have never heard of a leveraged etf that is not subject to tracking error. why should this one be an exception?

BONECRUSHER · Jul 28, 2016

zdreg said:
i have never heard of a leveraged etf that is not subject to tracking error. why should this one be an exception?

Better than most, but not perfect. Holding for a month or two probably o.k., a year not so much.