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What are the "options" for betting on 2 year treasury notes rallying? Futures and options ideas welcome: bull spread, futures trade outright, spread trades.
Can you help answer these questions from other members on NexusFi?
No interest? Let's say I predict a surprise interest rate move up or down in Feb 2018. How could I bet on that in a risk limited way? I am thinking the Fed will misstep and this will probably lead to a period of initial decline in the SPY in the first half next year followed by a wide range and mean reversion going into the summer months and then we'll see. This is very tentative formulation at this time.
I think any sort of re-normalization could be dangerous.
It looks like there are meetings in Jan and March. So, I'm assuming they won't make a move until the meeting? So it sounds like Jan to March is most likely.
There's a risk that we'll see a momentum fueled decline. So, if the markets do pull back. I think one has to cautious of any dip buying . Markets are more likely to make a V spike decline when they decline from momentum fueled rallies. This would likely to strong trend action on the downside.
Based on your hypothesis I would probably play this with spreads. Right now the spread is steepening, and if there was a downturn there is a good chance they would back off on reducing the balance sheet. So buy ZF and sell ZN.
Personally not a fan of the trade though. I think after the December rate hike we may start to see what we saw last year. Counter-intuitively rate normalization just helps push everything higher. Rates are just too low, and they've been overly cautious. Raising rates unleashes a few investors, and the balance sheet reduction is very good for banks. Even if it does all fall apart, it's not a train I'd want to be in front of while it is moving.
1. I want to be long interest rate volatility.
2. I want my long exposure to be weighted more to rising rate possibility but still profit from any big move in interest rates up or down.
3. I want it leveraged.
4. I want my risk limited.
5. If I can get a discount for trading this early, I'm happy to get a discount.
Basically, I want to be long interest rates and interest rate volatility.
Suggestions welcome for how to play this and some projections of what I can make on a 2 or 3 standard deviation. I weight a higher probability of such a move on a 1 day basis in S&P 500 in Feb. However, I'd rather play this from interest rate perspective-- just in case S&P 500 doesn't decline.
Hey tpredictor. Have you looked into some (leveraged) etf's for this? Buy, buy more and hold. If leveraged, I don't think you want to hold for long. So I'd go for a etf, buy, buy more averaging down if you still believe it'll go up and find a nice place to exit. Etfdb.com is a nice starting point to have a look.
