Skip to main content

New ZB Trade

As mentioned in a previous post on this trade, I was looking to initiate another short position when the opportunity arose. I got short at 126'20 and again at 127'20. I also sold a 129 call for more than a point so essentially it's getting short at a little over 130. This is the last of this position I am comfortable adding to at the moment. I'm still doing my homework on this trade. For instance, why would a $100,000 face value no coupon bond be selling for about $127,000 right now? Because ZBs are deliverable on a 6% yield basis, so there is a deflater/conversion factor calculation that has to be applied to the current price at time of delivery that brings it back in line. Right now I'm comfortable with the amount of risk I have on just based on technicals, a hunch that 30-year yields have hit a low and have nowhere to go but up, and QE2 bond purchases being fully priced in at this time. I believe there to be an upside price risk in this trade if the Euro region tanks and thus we see another flight to safety in the US dollar and Treasuries. For now I'm going to attempt to trade in and out on a short term basis using a position size that would allow me to stay in the trade should we in fact see some panic that pushes Treasuries higher. And thanks goes to Tom Sosnoff for turning me on to the idea. After initially analyzing the trade and because of the leverage involved with financial futures, I like the risk/reward offered on this idea.



Trade Update 12/1/10
I had set a GTC order to cover these two short contracts at 126'04. Though I was happy to wake up and find I made $2,000 while I was sleeping, it was also irritating to see that I could have doubled that by selling at any point later in the day. It took me a long time to get in the habit of setting a GTC for an exit point once I initiated a trade. This is just one of those times when I could have made more without it, but I just as easily could have woke up and found that with a GTC you could have covered in overnight trading but missed it. So you take the good with the bad. I set my exit point where I was willing to exit so can't cry later that you could have got more.
Labels:

Comments

Post a Comment

Popular posts from this blog

WOW! I think that sums it up

Many of you have been reading this blog may have noticed that my blogging frequency has increased over the past few weeks as I got short the market. As you can imagine I am down money since getting short the market, this is the time when most people pull away from posting. But my goal is to stay active and involved and show you that trading is not always rainbows and butterflies. It is times like these that the things I have been sharing over the past couple of weeks are so important. You need to trade small relative to your account. I have a decent short position in the market and my portfolios are set up to make some awesome returns if we finally turn lower. But something I would like to point out is that my account is 70% Cash.  I learned a long time ago how important it is to live by the rules you preach. Because of my discipline I am able to continue to hold my positions, I have time and capital on my side. I can't stress enough how important it is not to get to big....
Post a Comment
Read more

Stay Small, Stay Out of Trouble

To expand on my post from yesterday about patience. I want to talk about a very important element that allows patience in a position, and that is staying small. If you trade too big RELATIVE to your personal account size, you are likely to be forced to exit the trade before the trade works in your favor. Many trades myself included have all experienced the pains of trading a position way too large given our account size. There is this predisposition out there that the only way you are going to make money in the financial markets is if you are trading 10 lots of options and 1000 shares of stock at the time. This is not the case, and if this is your mentality you will likely ensure yourself trouble. We have all read the stories of traders blowing up their account. I personally think a good rule of thumb is to not risk more than 5% of your account value on any one position. Good Luck Trading! In The Money Trades And 1 favor that we ask:  If you like the hard work w...
Post a Comment
Read more
more good news from FXStreet : Tom Fitzpatrick, senior technical analyst at Citibank in New York. Monday, July 15, 2002 "Parity is a psychological, not a technical level...and whether we pause around parity or not, we are likely to see significant further dollar losses...Our initial target is $1.03 to $1.0450. If that level is taken out, it actually casts a question mark against the whole of the dollar's rally of the last seven years, and could open up a full-blown bear market for the dollar." Julian Jessop, chief European economist at Standard Chartered Bank. Monday, July 15, 2002 "The dollar is under pressure from everything from economic problems to asset reallocation away from the U.S. and corporate accounting problems. It's difficult to see any positive factor for the dollar at the moment. The root of the problem is the U.S. current account deficit. If the U.S. doesn't have to attract an enormous amount of foreign capital, people wouldn't have to wor...
Post a Comment
Read more