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T-Bond Bear Vehicles
Old 01-12-2010, 08:45 PM   #1
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T-Bond Bear Vehicles

First- this is a brainstorming post. I want all the suggestions that anyone can think of.

What I have thought of so far is to do a straight short sale of an ETF like TLT, buy puts on this issue, or buy a short or ultrashort bond ETF. The short bond ETF I think is a bad idea because of tracking error- they seem to chew up share price even when the position is not going against you.

Another possbility would be to use futures on the CME, or puts on financial futures.

Anything else come to mind?

Ha
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Old 01-12-2010, 08:54 PM   #2
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RYJUX, which I believe uses futures.
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Old 01-13-2010, 12:50 AM   #3
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First- this is a brainstorming post. I want all the suggestions that anyone can think of.

What I have thought of so far is to do a straight short sale of an ETF like TLT, buy puts on this issue, or buy a short or ultrashort bond ETF. The short bond ETF I think is a bad idea because of tracking error- they seem to chew up share price even when the position is not going against you.

Another possbility would be to use futures on the CME, or puts on financial futures.

Anything else come to mind?

Ha
Gosh, I sure wish I understood what you just said
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Old 01-13-2010, 01:29 AM   #4
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Wait for a bond version of this?

Ok, I'm just kidding.
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Old 01-13-2010, 06:20 AM   #5
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There are Euro-denominated CDS on US government debt.

(since we're just brainstorming, after all, its not likely a retail investor could buy one)
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Old 01-13-2010, 06:51 AM   #6
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Maybe you could short or buy puts on something like NLY. They go long fixed rate agency MBS and lever up 5 times or better with floating rate financing. But the dividends would make this costly.
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Old 01-13-2010, 07:39 AM   #7
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Have you looked at these? They are European-style, cash-settled, and you don't need a futures account to trade them.

You can create a synthetic short future by selling the call and buying the put.

And, perhaps best of all, you don't have to understand "cheapest to deliver".
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Old 01-13-2010, 08:26 AM   #8
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Gosh, I sure wish I understood what you just said
Me too. I think I will just stick to doing what I do best, losing money.
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Old 01-13-2010, 08:36 AM   #9
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If I shorted Treasuries, it would be a guarantee that a double dip recession was on the way.
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Old 01-13-2010, 04:04 PM   #10
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Thanks for all the sugestions. I found that the CBOE also sells listed options on various interest rates. I'll work out tracking, liquidity etc. over time. Don't know if I will do this or not, or how I would time it if I did, but I wanted to have my vehicles ready to go.

My lifetime history of bear bets is about 2:1 against me. Usually I get the market vulnerability right, but give up before the payoff because my timing is premature.

Ha
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