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If I want to bet on 2 year rising rates what are my options?


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If I want to bet on 2 year rising rates what are my options?

  #1 (permalink)
 tpredictor 
North Carolina
 
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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.

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  #3 (permalink)
 tpredictor 
North Carolina
 
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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.

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  #4 (permalink)
 SpeculatorSeth   is a Vendor
 
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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.

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  #5 (permalink)
 tpredictor 
North Carolina
 
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I found something called TYVIX

https://www.marketwatch.com/story/how-fed-leadership-uncertainty-could-make-interest-rate-volatility-great-again-2017-10-06

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  #6 (permalink)
 
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 Pa Dax 
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Just buy some CD's and roll over very 90 days or so.

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  #7 (permalink)
 tpredictor 
North Carolina
 
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Okay, let me specify what I want:

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.

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 Pa Dax 
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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.

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  #9 (permalink)
 tpredictor 
North Carolina
 
Experience: Beginner
Platform: NinjaTrader, Tradestation
Trading: es
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Sounds like best bet would be an options strangle with perhaps a combo futures spread.

https://www.bloomberg.com/news/articles/2017-07-12/bond-trader-bets-10-million-that-volatility-revival-is-imminent

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Last Updated on October 29, 2017


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