update on the 10 year note commentary
YOU MUST ALWAYS BE AWARE THAT THERE IS SIGNIFICANT RISK INVOLVED IN TRADING FUTURES AND/OR OPTIONS ON FUTURES AND ARE NOT SUITABLE FOR ALL INVESTORS.The June 10-year note 113 calls were offered @ 40 this morning, so we can assume our fill at that price. Once again, that is 40/64's and each 64th is $15.625, so we can assume we spent $625 per contract before commission and fees. Please note that the electronic market continues to gain a liquidity advantage over the open outcry market both in futures and options.
I also would like to respond to one of our fellow bloggers that came in with a excellant comment about a yield curve suggestion. He agreed with the bullish bias to the 10 year notes, but also wondered about the wisdom of selling the 30 year bonds against the bullish 10 year note position. To paraphrase one of my favorite commercials,.....Brilliant! Short term instruments have been losing to longer term instruments steadily since April of 2004. We would be admittedly picking a bottom in the trend, but I think this is a good bet given that we are at/or near 17 year lows in this particular spread. Since we bought the June 10 year note, 113 calls yesterday, let's not get too fancy. I suggest buying the June 30 year bond 110 puts. They are currently trading at 47/64's, or approximately $735 before commissions and fees. If this spread starts to work favorably, we will look to minimize our risk by legging into the sale of out of the money calls and out of the money puts against our existing long premium postions.
Happy trading!
Steve
posted by steve erdman @ 9:04 AM
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