I definitely want the discussion to go from bond/bond funds to futures so we can talk about implied financing, rolls, etc. Though, I believe that we are still working on defining some of the basics and identifying risks.lee1026 wrote:For things that are as far out as 2 weeks, how you model the roll will start becoming extremely important.
As an aside, if you think this will work, the correct answer isn't to try to lower your "cost basis" but to simply make money buying the dips and then selling a few ticks over.
If I change the way I measure success to be 1 tick above average, I get essentially the same results for 2006: (5 total contracts HMUZ 2006, H 2007)
1-day: 98.7% (307/311) <- only value that changed
3-day: 99.4% (309/311)
2-weeks: 99.4% (309/311)
4-weeks: 99.7% (310/311)
6-weeks: 99.7% (310/311)
8-weeks: 99.7% (310/311)
I have no objections to squeezing an extra tick or two from the dips, but the major aspect of this strategy is that it reduces (eliminates?) the long-term left-tail risk of my short-term treasury position. That is huge for my leveraged portfolio. It changes "bond Armageddon" years like 1994 into a flat line.
I just re-calculated 2013 with the new model, and I get the following success rates: (HMUZ 2013)
1-day: 98.8% (248/251)
3-day: 100% (251/251)
And 2013 with +1 tick profit:
1-day: 97.2% (244/251)
3-day: 98.4% (247/251)
2-weeks: 100% (251/251)