A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

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rascott
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Tue Sep 24, 2019 8:30 pm

DonIce wrote:
Tue Sep 24, 2019 8:08 pm
rascott wrote:
Tue Sep 24, 2019 6:15 pm
DonIce wrote:
Mon Sep 23, 2019 10:44 pm
RandomWord wrote:
Mon Sep 23, 2019 10:35 pm
But I also think it's important to keep in mind the scale. The leverage on these things is so large that it's easy to lose track of the big picture. I don't think $50 per year or whatever on a $200,000 notional value is worth worrying about it. Now, if there's some reason why eurodollars should deliver a larger return than treasury futures, that could be worth way more than $50 a year. But it would be strange if the market allowed such an inefficiency to persist, when these are both so heavily traded.
The notional value isn't really important, just the potential returns or potential volatility, right? Over the course of a year the 2 year futures contract usually moves around 1% or so, so that's about $2000. And $50 is 2.5% out of that $2k of movement.


This doesn't seem right to me.... that's like saying the expense ratio of a fund is based upon its volatility/ expected return. Every bond fund in existence would have probably worse numbers than this.

The correct comparison is trading costs to notional value.... that's the effective ER of this strategy.
Think about for example 5 year futures vs 10 year futures. To get roughly the same behavior with 5 year futures, you would need to hold 2 times the notional value, and so trade 2x as many contracts, and so have 2x the costs. The two positions should behave almost identically (2 5 year contracts vs 1 10 year contract). Which has the higher ER? If you think about it in terms of notional, they have the same ER. But if you think about it based on the cost you pay for the effect that you get, 2 5 years has a 2x higher ER. At least, that's how I've been thinking about it. Am I making a mistake somewhere?

Also, how are ERs defined for leveraged funds? I think its based on the value invested, not the value controlled by the leverage? For example, if you put $1000 into a 3x leveraged fund with an expense ratio of 1%, that's because its expenses are $10 on the $1000 that you put in, not $30 on the $3000 that your investment nominally controls.

No that is correct.... and that's what I said.... the ER would be the total trading cost per year/ notional value. You could figure that out pretty easy. So yeah, it would have 2x the cost.... bit 2x of nearly 0 is still pretty close to nearly zero.

An ultra short term bond fund doesn't have lower ERs than a long duration fund... actually likely has higher due to the constant work. But would you say don't invest in say
a Vanguard ST Investor Class treasury fund, it's too expensive compared to the expected return with a 0.20% ER. The hypothetical $200k investment costs you $400 a year in fees. Holding/ rolling one 2 year futures contract would be exponentially less than that. And holding a treasury futures contract with all the remaining cash in t- bills provides basically the identical return as just holding the treasury bond itself.

The Admiral class at 0.07% would cost you $140... still close to triple the cost of the futures contract, annually.

Put more simply, the trading fees are basically irrelevant.

rhe
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rhe » Tue Sep 24, 2019 8:48 pm

jt4 wrote:
Tue Sep 24, 2019 8:52 am
In the 2008 great recession, the T-bill rate dropped to nearly zero due to government intervention while the LIBOR rate shot up to 5% as the financial market tightened and banks stopped lending. I recognize that this plot only compares 3-mo rates, but it suggests that holding treasuries would be significantly more advantageous than holding eurodollars in times of distress. After all, we want treasuries to be negatively correlated with the stock market for the most benefit.
This would be a good argument for why it's important to hold a strip, rather than just (say) the second contract. Also, when I was doing this I had a fair amount of diversification across currencies. I used eurodollar equivalents in CAD, AUD, GBP, CHF, and EUR. There is a futures market for 2 year german bonds, but in the other currencies the spreads were wide enough that it didn't look profitable to trade the 2 or 3 year bond futures.

The most diversified position might be to hold treasury futures and euro schatz (two year bond) futures, combined with the eurodollar equivalents in the currencies that don't have good bond futures markets. Of course, the non-US markets might have lower expected returns.

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jt4
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by jt4 » Wed Sep 25, 2019 10:36 pm

rhe wrote:
Tue Sep 24, 2019 8:48 pm
jt4 wrote:
Tue Sep 24, 2019 8:52 am
In the 2008 great recession, the T-bill rate dropped to nearly zero due to government intervention while the LIBOR rate shot up to 5% as the financial market tightened and banks stopped lending. I recognize that this plot only compares 3-mo rates, but it suggests that holding treasuries would be significantly more advantageous than holding eurodollars in times of distress. After all, we want treasuries to be negatively correlated with the stock market for the most benefit.
This would be a good argument for why it's important to hold a strip, rather than just (say) the second contract. Also, when I was doing this I had a fair amount of diversification across currencies. I used eurodollar equivalents in CAD, AUD, GBP, CHF, and EUR. There is a futures market for 2 year german bonds, but in the other currencies the spreads were wide enough that it didn't look profitable to trade the 2 or 3 year bond futures.

The most diversified position might be to hold treasury futures and euro schatz (two year bond) futures, combined with the eurodollar equivalents in the currencies that don't have good bond futures markets. Of course, the non-US markets might have lower expected returns.
Yes, but I'd expect a sudden 2.5% spike (in 2008) in 3-mo libor to also affect eurodollar futures throughout the strip, potentially requiring you to sell stock (during the downturn) to meet your mark-to-market requirements for the eurodollar futures. Of course, later contracts should be less affected, but I'd still expect a spike like that in the libor to reverberate across all eurodollar contracts.

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jt4
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by jt4 » Tue Oct 08, 2019 10:00 pm

jt4 wrote:
Tue Sep 24, 2019 8:52 am
rhe wrote:
Sun Sep 22, 2019 7:17 am
I held a portfolio quite similar to this for the past two years, but toned it down a couple of weeks ago because I was getting worried. Over those two years my bond positions contributed about 6% growth to my total account value, so I disagree with those people who think the proposed bond position is "small". I do agree that on an average day the positions do not move very much, but in the past couple years there have been some very bad days for the stock market, and on some of those days bonds went down substantially as well. This portfolio is no fun to hold on those days, because you have to decide when you are going to start selling into losses.

As has been pointed out, transaction costs are very important. I was not happy rolling the treasury futures, and switched to eurodollars instead. With a two year eurodollar strip, you only have to roll an eighth of your position each quarter, and you can do it basically anytime you want, because the front contract barely moves at all and settles to cash.
@rhe I understand that eurodollar strips track treasuries quite well over the long term, but I recently came across the plot below that shows TED — the spread between the 3-mo treasury and 3-mo LIBOR (upon which the eurodollar is based).

Image

In the 2008 great recession, the T-bill rate dropped to nearly zero due to government intervention while the LIBOR rate shot up to 5% as the financial market tightened and banks stopped lending. I recognize that this plot only compares 3-mo rates, but it suggests that holding treasuries would be significantly more advantageous than holding eurodollars in times of distress. After all, we want treasuries to be negatively correlated with the stock market for the most benefit.
I'd like to echo again that for this strategy, 2-year treasuries are better to hold than eurodollars in the case of another financial crisis as eurodollars are tied to the LIBOR bank interest rate, which can skyrocket during a panic.

If holding eurodollars, this could have the horrible effect of causing your bond futures and equity positions to drop in value at the same time. A margin call on the futures side would force you to sell stocks at a low.

Note that treasuries did not experience this same interest hike as the government kept the rate from skyrocketing in 2008 (see T-bill curve).

rhe
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rhe » Thu Oct 10, 2019 5:46 am

jt4 wrote:
Tue Oct 08, 2019 10:00 pm
I'd like to echo again that for this strategy, 2-year treasuries are better to hold than eurodollars in the case of another financial crisis as eurodollars are tied to the LIBOR bank interest rate, which can skyrocket during a panic.

If holding eurodollars, this could have the horrible effect of causing your bond futures and equity positions to drop in value at the same time. A margin call on the futures side would force you to sell stocks at a low.

Note that treasuries did not experience this same interest hike as the government kept the rate from skyrocketing in 2008 (see T-bill curve).
I think there are a couple of separate issues here. First, I agree that the front eurodollar contract exhibited some bad behaviour, but here is the second contract:
https://www.quandl.com/data/CHRIS/CME_E ... ract-2-ED2
If you were holding a two year strip, 7/8ths of your position was not in the front contract, so you're not going to be that badly hit.

Second, and I think more importantly, the bond futures market for 2 year bonds is not really tradeable outside of the US and maybe germany. There are eurodollar equivalents that are tradeable in about six currencies. Thus there is a tradeoff: either your money is in "risk free" government bonds, but only in one country, or it is in slightly risky bonds, but spread out around the world. Perhaps there are some situations where Switzerland or Australia might be considered a safer place for money than US treasuries? We didn't see this happen in the financial crisis, but presumably the next crisis will be different.

robertmcd
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by robertmcd » Fri Oct 18, 2019 11:37 am

In regards to Eurodollars, this is the response I got from Eric Hickman at Kessler:

"I have done a lot of back-testing work with these shorter instruments, not trying to eliminate the negative carry, but to possibly capture more movement. The negative carry cannot be eliminated because what you don’t pay for in negative spread, you end up paying the equivalent rolling from one contract to the next (the roll-up the curve). That being said, we tried the trade with Eurodollars in the past but they have a nasty credit risk problem that could easily become real in this upcoming recession. In the last recession, the Libor credit spread went from around 10 basis points to 367 at its worst. This works against the trade. Fed funds futures don’t have credit risk (maybe you could argue a little), but we cannot find a total return advantage to using them versus the 2-year, and they are far less liquid."

rascott
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Fri Oct 18, 2019 12:56 pm

robertmcd wrote:
Fri Oct 18, 2019 11:37 am
In regards to Eurodollars, this is the response I got from Eric Hickman at Kessler:

"I have done a lot of back-testing work with these shorter instruments, not trying to eliminate the negative carry, but to possibly capture more movement. The negative carry cannot be eliminated because what you don’t pay for in negative spread, you end up paying the equivalent rolling from one contract to the next (the roll-up the curve). That being said, we tried the trade with Eurodollars in the past but they have a nasty credit risk problem that could easily become real in this upcoming recession. In the last recession, the Libor credit spread went from around 10 basis points to 367 at its worst. This works against the trade. Fed funds futures don’t have credit risk (maybe you could argue a little), but we cannot find a total return advantage to using them versus the 2-year, and they are far less liquid."
Thanks for posting his feedback. Are you considering using them?

robertmcd
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by robertmcd » Fri Oct 18, 2019 1:14 pm

rascott wrote:
Fri Oct 18, 2019 12:56 pm
robertmcd wrote:
Fri Oct 18, 2019 11:37 am
In regards to Eurodollars, this is the response I got from Eric Hickman at Kessler:

"I have done a lot of back-testing work with these shorter instruments, not trying to eliminate the negative carry, but to possibly capture more movement. The negative carry cannot be eliminated because what you don’t pay for in negative spread, you end up paying the equivalent rolling from one contract to the next (the roll-up the curve). That being said, we tried the trade with Eurodollars in the past but they have a nasty credit risk problem that could easily become real in this upcoming recession. In the last recession, the Libor credit spread went from around 10 basis points to 367 at its worst. This works against the trade. Fed funds futures don’t have credit risk (maybe you could argue a little), but we cannot find a total return advantage to using them versus the 2-year, and they are far less liquid."
Thanks for posting his feedback. Are you considering using them?
I am. I am trying to make the numbers work with my desired portfolio. Problem is minimum account size and need to be a QEP (CFTC's version of an accredited investor). More info below from Eric - granted this assumes no more money ever being added (if you hold equity in another account you could go higher leverage than below). 22x leverage gives you a roughly 70% stock/30% T bills (22x leveraged 2 yr) risk parity portfolio by my calculation.

What is the maximum amount of leverage you recommend running (if you are using T bills as collateral) on the 2 yr? I see a duration target of 24 on that slideshow so that implies around 12x on the 2 yr. I am interested in counterbalancing equity allocations greater than 60%, and am curious how high you can get without having to hold S&P futures.

"The way I think about it is to consider how much margin an account should have to sustain an x basis point movement against you in the 2-year without incurring a margin call. Margin calls are ok if you are prepared to put in more money, but forced selling is the major thing to avoid. In this analysis, I assume that no more money comes into the account, meaning that we are doing everything to set-up the account in advance to have no margin call in adverse circumstances.

There are a couple of factors to this. I first assume that we could have a yield backup at some point of a magnitude that we have seen in past recession eras. The biggest of these was 171 basis points in 2008 (page 24 of presentation). The second concept is to assume that margin in the 2-year contract is not what it is today ($704 per contract) but the most it has risen to historically, $2295. It got this high in several 2-year contracts in 2007 and 2008. Take note that I don’t think we will see a 171 basis point back-up in this cycle and I also don’t think that 2-year yield volatility will get high enough to justify the highest margin, but I am taking my opinion out of it to be safe.

Taking all this together, 44 units of portfolio duration is the maximum exposure a safely set-up account should have (~22x leverage) to avoid a margin call with these assumptions. As I think you know, these are guidelines, not hard and fast rules

With that amount of duration and leverage, you can then make a rough estimate of the gain you would make should the 2-year fall to its old low of 0.15% from here (1.45%). The rough gain is ~57% using these assumptions."

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hdas
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by hdas » Fri Oct 18, 2019 2:24 pm

Im considering this scheme for some collateral money, so targeting a low drawdown (<10%). Risk parity of SPY and SHY is about 10/90, then leveraging this 3x. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

rhe
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rhe » Fri Oct 18, 2019 8:50 pm

robertmcd wrote:
Fri Oct 18, 2019 11:37 am
In regards to Eurodollars, this is the response I got from Eric Hickman at Kessler:

"I have done a lot of back-testing work with these shorter instruments, not trying to eliminate the negative carry, but to possibly capture more movement. The negative carry cannot be eliminated because what you don’t pay for in negative spread, you end up paying the equivalent rolling from one contract to the next (the roll-up the curve).
This sounds very interesting, but I have to confess that I don't understand it! Is the "negative carry" here a relative comparison to treasuries, perhaps because the financing costs are different? Or is it just a statement that currently the yield curve is inverted, and so right now there is "roll up" rather than "roll down"?

I hadn't previously thought about differences in financing costs, but if the financing for treasury futures is at the repo rate, and financing for eurodollars is at LIBOR, then it seems like this could be a compelling reason to go with treasury futures since they would be a less expensive way of taking roughly the same position.

ThrustVectoring
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by ThrustVectoring » Sat Oct 19, 2019 5:23 am

rhe wrote:
Fri Oct 18, 2019 8:50 pm
robertmcd wrote:
Fri Oct 18, 2019 11:37 am
In regards to Eurodollars, this is the response I got from Eric Hickman at Kessler:

"I have done a lot of back-testing work with these shorter instruments, not trying to eliminate the negative carry, but to possibly capture more movement. The negative carry cannot be eliminated because what you don’t pay for in negative spread, you end up paying the equivalent rolling from one contract to the next (the roll-up the curve).
This sounds very interesting, but I have to confess that I don't understand it! Is the "negative carry" here a relative comparison to treasuries, perhaps because the financing costs are different? Or is it just a statement that currently the yield curve is inverted, and so right now there is "roll up" rather than "roll down"?

I hadn't previously thought about differences in financing costs, but if the financing for treasury futures is at the repo rate, and financing for eurodollars is at LIBOR, then it seems like this could be a compelling reason to go with treasury futures since they would be a less expensive way of taking roughly the same position.
Financing for treasury futures is not at the repo rate. The futures contract price is driven by the cash-and-carry arbitrage trade: buy the underlying cheapest-to-deliver treasury bond, sell short the futures contract, and deliver the bond at settlement. This trade will be preferred over an equivalent treasury bill when the yield is higher than the equivalent treasury bill. For rolling quarterly contracts, this is roughly the 3-mo t-bill rate.
Current portfolio: 60% VTI / 40% VXUS

UntoTheBreach
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by UntoTheBreach » Sat Oct 19, 2019 7:28 am

But current prices do seem to imply financing costs are at repo rate (2%) not t-bill rate (1.7%) though.
Which I thought makes sense assuming cash and carry arbitrageurs buy the ctd with financing at repo rate.

rascott
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Sat Oct 19, 2019 8:03 am

ThrustVectoring wrote:
Sat Oct 19, 2019 5:23 am
rhe wrote:
Fri Oct 18, 2019 8:50 pm
robertmcd wrote:
Fri Oct 18, 2019 11:37 am
In regards to Eurodollars, this is the response I got from Eric Hickman at Kessler:

"I have done a lot of back-testing work with these shorter instruments, not trying to eliminate the negative carry, but to possibly capture more movement. The negative carry cannot be eliminated because what you don’t pay for in negative spread, you end up paying the equivalent rolling from one contract to the next (the roll-up the curve).
This sounds very interesting, but I have to confess that I don't understand it! Is the "negative carry" here a relative comparison to treasuries, perhaps because the financing costs are different? Or is it just a statement that currently the yield curve is inverted, and so right now there is "roll up" rather than "roll down"?

I hadn't previously thought about differences in financing costs, but if the financing for treasury futures is at the repo rate, and financing for eurodollars is at LIBOR, then it seems like this could be a compelling reason to go with treasury futures since they would be a less expensive way of taking roughly the same position.
Financing for treasury futures is not at the repo rate. The futures contract price is driven by the cash-and-carry arbitrage trade: buy the underlying cheapest-to-deliver treasury bond, sell short the futures contract, and deliver the bond at settlement. This trade will be preferred over an equivalent treasury bill when the yield is higher than the equivalent treasury bill. For rolling quarterly contracts, this is roughly the 3-mo t-bill rate.

I've yet to get a good explanation why there is so much disparity in the implied repo rates on the CME tool:

https://www.cmegroup.com/tools-informat ... ytics.html

The shorter duration contracts seem to stay steady at roughly 1.9%.... as you go out the yield curve, the implied repo rates drop. And if one watches this during the trading day.... the rates move all over the place and isn't unusual to see them actually move negative..... particularly on the Ultra 30 contract.

caklim00
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Sat Oct 19, 2019 12:08 pm

I'm still struggling with the idea that one can just use a bunch of 2 year futures rather than some of each length. Something just doesn't sit right with me that everything is 2 years. If this was really the best option why wouldn't NTSX just load up on 2 years instead of distributing it at different lengths.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by MotoTrojan » Sat Oct 19, 2019 12:12 pm

caklim00 wrote:
Sat Oct 19, 2019 12:08 pm
I'm still struggling with the idea that one can just use a bunch of 2 year futures rather than some of each length. Something just doesn't sit right with me that everything is 2 years. If this was really the best option why wouldn't NTSX just load up on 2 years instead of distributing it at different lengths.
NTSX is looking to get some income from this tilt, rather than achieve risk-parity or similar protection against an equity plunge, since it only has 90% equity exposure.

Frankly I'd prefer if it held more equity by holding less treasuries, but only using long-duration ones with effectively the same duration it has now.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Sat Oct 19, 2019 4:38 pm

MotoTrojan wrote:
Sat Oct 19, 2019 12:12 pm
caklim00 wrote:
Sat Oct 19, 2019 12:08 pm
I'm still struggling with the idea that one can just use a bunch of 2 year futures rather than some of each length. Something just doesn't sit right with me that everything is 2 years. If this was really the best option why wouldn't NTSX just load up on 2 years instead of distributing it at different lengths.
NTSX is looking to get some income from this tilt, rather than achieve risk-parity or similar protection against an equity plunge, since it only has 90% equity exposure.

Frankly I'd prefer if it held more equity by holding less treasuries, but only using long-duration ones with effectively the same duration it has now.
Is expected return of 3 10 years the same as 1 30 year? I just don't get it yet...

MotoTrojan
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by MotoTrojan » Sat Oct 19, 2019 5:58 pm

caklim00 wrote:
Sat Oct 19, 2019 4:38 pm
MotoTrojan wrote:
Sat Oct 19, 2019 12:12 pm
caklim00 wrote:
Sat Oct 19, 2019 12:08 pm
I'm still struggling with the idea that one can just use a bunch of 2 year futures rather than some of each length. Something just doesn't sit right with me that everything is 2 years. If this was really the best option why wouldn't NTSX just load up on 2 years instead of distributing it at different lengths.
NTSX is looking to get some income from this tilt, rather than achieve risk-parity or similar protection against an equity plunge, since it only has 90% equity exposure.

Frankly I'd prefer if it held more equity by holding less treasuries, but only using long-duration ones with effectively the same duration it has now.
Is expected return of 3 10 years the same as 1 30 year? I just don't get it yet...
No but duration is similar, so volatility essentially. Expected return of 3x 10 year also depends on the borrowing cost; expected return of 3x 10 year could be less than 1x 10 year when yield curve is inverted, but then if rates drop the 3x could still win due to the extra duration.

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hdas
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by hdas » Sun Oct 20, 2019 3:41 pm

hdas wrote:
Fri Oct 18, 2019 2:24 pm
Im considering this scheme for some collateral money, so targeting a low drawdown (<10%). Risk parity of SPY and SHY is about 10/90, then leveraging this 3x. Cheers :greedy
After a second look, I no longer believe this maturity is the most apt. Even though you maximize sharp ratio, you miss on the positive bond convexity that offers equity crash protection. Fixed income is a complex topic and I will take my time looking into it. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

caklim00
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Sun Oct 20, 2019 4:06 pm

hdas wrote:
Sun Oct 20, 2019 3:41 pm
hdas wrote:
Fri Oct 18, 2019 2:24 pm
Im considering this scheme for some collateral money, so targeting a low drawdown (<10%). Risk parity of SPY and SHY is about 10/90, then leveraging this 3x. Cheers :greedy
After a second look, I no longer believe this maturity is the most apt. Even though you maximize sharp ratio, you miss on the positive bond convexity that offers equity crash protection. Fixed income is a complex topic and I will take my time looking into it. Cheers :greedy
I'm really wondering the same thing right now. I think it would scare me to have so much at any length. I'm highly considering hedging my bets and just doing 1 each of each contract (except for the Ultra 30 which doesn't look like it trades nearly as much), rolling,and calling it a day since this seems like what NTSX is doing (although since they have enough money they can keep all 5 contracts about the same percentage). Maintenance would be $7520 (2- $670, 5- $800, 10 - $1300 , Ultra 10 - $1750, 30 - $3000).

Here is NTSX

Code: Select all

US 5YR NOTE (CBT) DEC19 XCBT 2019123112.10%
US 10YR ULTRA FUT DEC19 XCBT 2019121911.84%
US 10YR NOTE (CBT)DEC19 XCBT 2019121911.66%
US 2YR NOTE (CBT) DEC19 XCBT 2019123111.59%
US LONG BOND(CBT) DEC19 XCBT 2019121911.49%
Which one is US LONG BOND(CBT)? I get different results either 30 year or Ultra Treasury Bond depeneding how I do my search. very odd...
EDIT: checking M* it looks like its just the regular 30 year which makes more sense.

rascott
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Sun Oct 20, 2019 4:19 pm

caklim00 wrote:
Sun Oct 20, 2019 4:06 pm
hdas wrote:
Sun Oct 20, 2019 3:41 pm
hdas wrote:
Fri Oct 18, 2019 2:24 pm
Im considering this scheme for some collateral money, so targeting a low drawdown (<10%). Risk parity of SPY and SHY is about 10/90, then leveraging this 3x. Cheers :greedy
After a second look, I no longer believe this maturity is the most apt. Even though you maximize sharp ratio, you miss on the positive bond convexity that offers equity crash protection. Fixed income is a complex topic and I will take my time looking into it. Cheers :greedy
I'm really wondering the same thing right now. I think it would scare me to have so much at any length. I'm highly considering hedging my bets and just doing 1 each of each contract (except for the Ultra 30 which doesn't look like it trades nearly as much), rolling,and calling it a day since this seems like what NTSX is doing (although since they have enough money they can keep all 5 contracts about the same percentage). Maintenance would be $7520 (2- $670, 5- $800, 10 - $1300 , Ultra 10 - $1750, 30 - $3000).

Here is NTSX

Code: Select all

US 5YR NOTE (CBT) DEC19 XCBT 2019123112.10%
US 10YR ULTRA FUT DEC19 XCBT 2019121911.84%
US 10YR NOTE (CBT)DEC19 XCBT 2019121911.66%
US 2YR NOTE (CBT) DEC19 XCBT 2019123111.59%
US LONG BOND(CBT) DEC19 XCBT 2019121911.49%
Which one is US LONG BOND(CBT)? I get different results either 30 year or Ultra Treasury Bond depeneding how I do my search. very odd...
EDIT: checking M* it looks like its just the regular 30 year which makes more sense.
The traditional 30 is aka the Long Bond.

robertmcd
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by robertmcd » Mon Oct 21, 2019 9:16 am

hdas wrote:
Sun Oct 20, 2019 3:41 pm
hdas wrote:
Fri Oct 18, 2019 2:24 pm
Im considering this scheme for some collateral money, so targeting a low drawdown (<10%). Risk parity of SPY and SHY is about 10/90, then leveraging this 3x. Cheers :greedy
After a second look, I no longer believe this maturity is the most apt. Even though you maximize sharp ratio, you miss on the positive bond convexity that offers equity crash protection. Fixed income is a complex topic and I will take my time looking into it. Cheers :greedy
The 2 yr yield has outperformed the 30 yr yield by 21 bps the past month. If you look at the past 2 recessions, a leveraged investment in the 2 yr (to match the duration of TLT) thru the full rate cutting/recession cycle outperformed TLT dramatically. In upward sloping yield curve times, when the Fed may be looking to raise rates, the long end is the place to be, as you will be losing less per duration than the short end (ie short end rises faster).

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hdas
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by hdas » Mon Oct 21, 2019 9:30 am

robertmcd wrote:
Mon Oct 21, 2019 9:16 am
hdas wrote:
Sun Oct 20, 2019 3:41 pm
hdas wrote:
Fri Oct 18, 2019 2:24 pm
Im considering this scheme for some collateral money, so targeting a low drawdown (<10%). Risk parity of SPY and SHY is about 10/90, then leveraging this 3x. Cheers :greedy
After a second look, I no longer believe this maturity is the most apt. Even though you maximize sharp ratio, you miss on the positive bond convexity that offers equity crash protection. Fixed income is a complex topic and I will take my time looking into it. Cheers :greedy
The 2 yr yield has outperformed the 30 yr yield by 21 bps the past month. If you look at the past 2 recessions, a leveraged investment in the 2 yr (to match the duration of TLT) thru the full rate cutting/recession cycle outperformed TLT dramatically. In upward sloping yield curve times, when the Fed may be looking to raise rates, the long end is the place to be, as you will be losing less per duration than the short end (ie short end rises faster).
I think we are discussing different things, and/or perhaps we have different goals when looking at this scheme. I don't question the higher sharpe of the 10/90 Equities + 2 Year, which can (and should) be leveraged. However, if you care at all or have a mandate for maximum drawdown, you will miss the added kick of positive bond convexity during the months or weeks of extreme stress in the stock market. In the empirical evidence this is mostly shown in the 2008 period, where the leverage 2year scheme has a deeper drawdown than a longer maturity after normalizing for volatility. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Mon Oct 21, 2019 12:47 pm

Can someone help explain how to earn interest on the cash margin requirements for treasury futures? I contacted scwhab again as I was skeptical that you could use money market fund to satisfy margin requirements. They said it counts as a marginable security, but then whatever cash i don't have would be at margin interest rate (in my case 9% ouch). The example we used was that if you have $25K in account, 1K in cash and $24K in money market fund and purchase 1 30 year future (cash requirement is 3k) then $1K cash would be used to meet margin requirement and you would then have a margin loan of 2K. That really stinks and defeats the whole purpose of doing the money market. Back to the drawing board lol. I'm guessing ETFs would have the same exact situation.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by robertmcd » Mon Oct 21, 2019 12:48 pm

caklim00 wrote:
Mon Oct 21, 2019 12:47 pm
Can someone help explain how to earn interest on the cash margin requirements for treasury futures? I contacted scwhab again as I was skeptical that you could use money market fund to satisfy margin requirements. They said it counts as a marginable security, but then whatever cash i don't have would be at margin interest rate (in my case 9% ouch). The example we used was that if you have $25K in account, 1K in cash and $24K in money market fund and purchase 1 30 year future (cash requirement is 3k) then $1K cash would be used to meet margin requirement and you would then have a margin loan of 2K. That really stinks and defeats the whole purpose of doing the money market. Back to the drawing board lol. I'm guessing ETFs would have the same exact situation.
^ Do you know of any brokerages where you can hold T bills directly to avoid these issues?

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Mon Oct 21, 2019 1:17 pm

robertmcd wrote:
Mon Oct 21, 2019 12:48 pm
caklim00 wrote:
Mon Oct 21, 2019 12:47 pm
Can someone help explain how to earn interest on the cash margin requirements for treasury futures? I contacted scwhab again as I was skeptical that you could use money market fund to satisfy margin requirements. They said it counts as a marginable security, but then whatever cash i don't have would be at margin interest rate (in my case 9% ouch). The example we used was that if you have $25K in account, 1K in cash and $24K in money market fund and purchase 1 30 year future (cash requirement is 3k) then $1K cash would be used to meet margin requirement and you would then have a margin loan of 2K. That really stinks and defeats the whole purpose of doing the money market. Back to the drawing board lol. I'm guessing ETFs would have the same exact situation.
^ Do you know of any brokerages where you can hold T bills directly to avoid these issues?
I have no idea... And I'm guessing this is where NTSX is going to juice returns over what I can do personally. I was finally set on rolling futures, but if I don't have a good way to manage the cash portion then I'm already like -2% in the whole. IKBR pays interest above 10K on a pro account but its less than 1% so the first 10k in cash earns nothing. Argh...

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by 305pelusa » Mon Oct 21, 2019 1:26 pm

caklim00 wrote:
Mon Oct 21, 2019 1:17 pm
robertmcd wrote:
Mon Oct 21, 2019 12:48 pm
caklim00 wrote:
Mon Oct 21, 2019 12:47 pm
Can someone help explain how to earn interest on the cash margin requirements for treasury futures? I contacted scwhab again as I was skeptical that you could use money market fund to satisfy margin requirements. They said it counts as a marginable security, but then whatever cash i don't have would be at margin interest rate (in my case 9% ouch). The example we used was that if you have $25K in account, 1K in cash and $24K in money market fund and purchase 1 30 year future (cash requirement is 3k) then $1K cash would be used to meet margin requirement and you would then have a margin loan of 2K. That really stinks and defeats the whole purpose of doing the money market. Back to the drawing board lol. I'm guessing ETFs would have the same exact situation.
^ Do you know of any brokerages where you can hold T bills directly to avoid these issues?
I have no idea... And I'm guessing this is where NTSX is going to juice returns over what I can do personally. I was finally set on rolling futures, but if I don't have a good way to manage the cash portion then I'm already like -2% in the whole. IKBR pays interest above 10K on a pro account but its less than 1% so the first 10k in cash earns nothing. Argh...
I've brought up the exact same issues before. It's why I don't leverage with futures. Here's some recommendations of FCMs that will allow Tbills as collateral:
viewtopic.php?p=4742473#p4742473

That page (and the next too) have good info if you're interested in leveraging with futures and want to think about the tax, collateral and interest implications of it.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Mon Oct 21, 2019 1:29 pm

caklim00 wrote:
Mon Oct 21, 2019 12:47 pm
Can someone help explain how to earn interest on the cash margin requirements for treasury futures? I contacted scwhab again as I was skeptical that you could use money market fund to satisfy margin requirements. They said it counts as a marginable security, but then whatever cash i don't have would be at margin interest rate (in my case 9% ouch). The example we used was that if you have $25K in account, 1K in cash and $24K in money market fund and purchase 1 30 year future (cash requirement is 3k) then $1K cash would be used to meet margin requirement and you would then have a margin loan of 2K. That really stinks and defeats the whole purpose of doing the money market. Back to the drawing board lol. I'm guessing ETFs would have the same exact situation.

Considering that the cash sweep balances are one of the main ways brokers make money, it's going to be hard to find any alternative to that. But it's not like you need to keep that much in the cash account. You could keep a few grand in there.... you might lose $75/yr in interest, or so, but so what?

Put the rest in whatever type of fund you want (BIL or MINT are ones I've used) .... then if your cash account is running low you just sell some of the MM-esque ETF. $0 trades make this even better.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Mon Oct 21, 2019 2:29 pm

rascott wrote:
Mon Oct 21, 2019 1:29 pm
Considering that the cash sweep balances are one of the main ways brokers make money, it's going to be hard to find any alternative to that. But it's not like you need to keep that much in the cash account. You could keep a few grand in there.... you might lose $75/yr in interest, or so, but so what?

Put the rest in whatever type of fund you want (BIL or MINT are ones I've used) .... then if your cash account is running low you just sell some of the MM-esque ETF. $0 trades make this even better.
I'll probably take your advice if I do this and just run this at IKBR lite which is the cheapest place to do contracts it appears. Anyone try rolling treasury futures yet at IKBR lite? Wondering if the interface works alright for this.

I called one of the futures brokers and they quoted $39 to roll tbills each time. Schwab doesn't allow tbills to satisfy margin requirments. Probably a dead end,.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by Kbg » Mon Oct 21, 2019 4:33 pm

Small investors do not get the same margin deal with 90 day T-Bills meeting margin (cash) requirements as large professional traders do. As a small investor you can either put in a certain amount of actual cash that will likely meet whatever drawdown scenario you are going to use and get whatever, if any, interest from your broker or buy something very short term and watch your daily balance and sell some of the “cash”to ensure you don’t take on a high interest short term loan when your cash balance becomes negative.

The above are the extremes, one could split the difference and put in enough to handle (say) a normal or extreme weekly move and check once a week. If you are really serious about costs and track them (I do), you would be surprised at how costly typical human errors are like fat fingering a trade, going on vacation at a bad time, etc. etc.

IB is about as good as it gets for a private investor when it comes to costs...and one should definitely spend some time calculating costs. Commissions, unless your account is quite small, are probably not your largest cost by any stretch.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Mon Oct 21, 2019 7:52 pm

I think with IKBR lite you are going to have to sell and then buy as seperate transactions so you can't even "roll" unless I'm wrong.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by siamond » Mon Oct 21, 2019 8:35 pm

jt4 wrote:
Fri Sep 20, 2019 4:44 pm
When backtested from 1980 to 2018 using Simba's spreadsheet with yearly rebalancing (available through the Boglehead wiki), we get the following [...]
If I understand well, the portfolio can be modeled as 66% VTSMX, 29% VGTSX, 285% VFISX, -280% VUSXX (T-Bills). Why not backtest since 1970? The data is available in Simba. And there are plenty of informative charts you can play with.

I gave it a quick run and unsurprisingly, the leverage portfolio would not have helped during the oil crisis (drawdown similar to 100% TSM).It wouldn't have hurt either, in all fairness.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by jt4 » Mon Oct 21, 2019 9:55 pm

siamond wrote:
Mon Oct 21, 2019 8:35 pm
jt4 wrote:
Fri Sep 20, 2019 4:44 pm
When backtested from 1980 to 2018 using Simba's spreadsheet with yearly rebalancing (available through the Boglehead wiki), we get the following [...]
If I understand well, the portfolio can be modeled as 66% VTSMX, 29% VGTSX, 285% VFISX, -280% VUSXX (T-Bills). Why not backtest since 1970? The data is available in Simba. And there are plenty of informative charts you can play with.

I gave it a quick run and unsurprisingly, the leverage portfolio would not have helped during the oil crisis (drawdown similar to 100% TSM).It wouldn't have hurt either, in all fairness.
Thanks for your comment siamond. From what I recall (this was over a month ago), at the time, I didn't feel that the interest rate environment of the 1970s was reflective of today. The interest rates of the 1970s were quite spikey, with steep drops and rises in interest rates.

Nonetheless, as you point out, if you held your position (with leveraged 2-year treasuries) from 1970-1980 (in the spikey interest rate environment), the performance of the portfolio with leveraged 2-yr treasuries was very similar to a 100% VTSMX (total US market) portfolio (7.5% CAGR [leveraged 2-yr portfolio] vs 8.1% CAGR and 21.8% std dev [leveraged 2-yr portfolio] vs 20.8% std dev), with a slightly larger drawdown (45% [leveraged 2-yr portfolio] vs 40%).

It's worth pointing out that over this time, the federal funds rate when from 9.5% in Jan 1970 to 14% in Jan. 1980 with lots of spikes throughout. Somewhat remarkably, despite the somewhat dramatic increase in short-term interest rates over this period, the 2-yr treasuries did not tank the portfolio.

Regardless, my conclusions for backtesting from 1980 to 2018 stay true if you extend the range to 1970. The main difference is that the max drawdown increases for both the leveraged portfolio (and 100% VTSMX) due to the volatile environment of the 1970s.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by EfficientInvestor » Tue Oct 22, 2019 7:12 am

rascott wrote:
Mon Oct 21, 2019 1:29 pm
caklim00 wrote:
Mon Oct 21, 2019 12:47 pm
Can someone help explain how to earn interest on the cash margin requirements for treasury futures? I contacted scwhab again as I was skeptical that you could use money market fund to satisfy margin requirements. They said it counts as a marginable security, but then whatever cash i don't have would be at margin interest rate (in my case 9% ouch). The example we used was that if you have $25K in account, 1K in cash and $24K in money market fund and purchase 1 30 year future (cash requirement is 3k) then $1K cash would be used to meet margin requirement and you would then have a margin loan of 2K. That really stinks and defeats the whole purpose of doing the money market. Back to the drawing board lol. I'm guessing ETFs would have the same exact situation.

Considering that the cash sweep balances are one of the main ways brokers make money, it's going to be hard to find any alternative to that. But it's not like you need to keep that much in the cash account. You could keep a few grand in there.... you might lose $75/yr in interest, or so, but so what?

Put the rest in whatever type of fund you want (BIL or MINT are ones I've used) .... then if your cash account is running low you just sell some of the MM-esque ETF. $0 trades make this even better.
I am also using the approach of keeping a certain amount of cash (a few thousand for each contract) uninvested and keeping the rest in MINT or JPST. To analyze how this approach has worked, I did the following backtest. I pulled the last 10 years of the 2-year Treasury Futures Total Return Index from the S&P site (https://us.spindices.com/indices/fixed- ... turn-index). I then uploaded that data set to Portfolio Visualizer (PV). In PV, I assumed that I would have 100% exposure to this 2-year treasury total return fund. I then set CASHX to -100 to reflect the borrowing cost associated with the futures contract. I then assumed 10% of my cash would be either tied up as collateral or sitting uninvested in my brokerage account so it could sweep back and forth to cover the futures contract. This 10% would earn nothing, so I put it in a CASHZERO fund that I created (this is just a 0% return every month). This is a very conservative assumption since you would need nowhere near 10% of funds sitting idle for a 2-year treasury contract. I then put the remaining balance (90%) in MINT. Even though you have some cash sitting idle, the investment in the ultra-short bond fund has created a nice spread above the cash rate over the last 10 years and more than offsets the idle cash that isn't earning anything. This even held true during the rising interest rates of 2015-2018. If others could chime in and let me know if you agree with this analysis, I would appreciate it.

Image

caklim00
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Tue Oct 22, 2019 9:32 am

Where is everyone doing their futures?
I opened an IKBR lite account, but they don't appear to be able to roll the contracts unless you upgrade to pro. I contacted generic trade who has 0.59 contracts but they don't have roll capability either.

rascott
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Tue Oct 22, 2019 10:49 am

caklim00 wrote:
Tue Oct 22, 2019 9:32 am
Where is everyone doing their futures?
I opened an IKBR lite account, but they don't appear to be able to roll the contracts unless you upgrade to pro. I contacted generic trade who has 0.59 contracts but they don't have roll capability either.
What do you mean they can't roll contracts? That's odd....all it really means is that you'd do two trades instead of one, if they don't have the "roll" option.

Shouldn't be that big of deal. I'm using TDA/Thinkorswim....they have the roll option (during the actual roll period...next one will be Dec).

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Tue Oct 22, 2019 3:11 pm

rascott wrote:
Tue Oct 22, 2019 10:49 am
caklim00 wrote:
Tue Oct 22, 2019 9:32 am
Where is everyone doing their futures?
I opened an IKBR lite account, but they don't appear to be able to roll the contracts unless you upgrade to pro. I contacted generic trade who has 0.59 contracts but they don't have roll capability either.
What do you mean they can't roll contracts? That's odd....all it really means is that you'd do two trades instead of one, if they don't have the "roll" option.

Shouldn't be that big of deal. I'm using TDA/Thinkorswim....they have the roll option (during the actual roll period...next one will be Dec).
No ability to copen and close contracts on same order. IKBR lite apparently allows it only through the mobile app, but I've been very unimpressed by IKBR so far. I want to keep this as simple as possible, less chance of screwing something up.

rascott
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Tue Oct 22, 2019 3:48 pm

caklim00 wrote:
Tue Oct 22, 2019 3:11 pm
rascott wrote:
Tue Oct 22, 2019 10:49 am
caklim00 wrote:
Tue Oct 22, 2019 9:32 am
Where is everyone doing their futures?
I opened an IKBR lite account, but they don't appear to be able to roll the contracts unless you upgrade to pro. I contacted generic trade who has 0.59 contracts but they don't have roll capability either.
What do you mean they can't roll contracts? That's odd....all it really means is that you'd do two trades instead of one, if they don't have the "roll" option.

Shouldn't be that big of deal. I'm using TDA/Thinkorswim....they have the roll option (during the actual roll period...next one will be Dec).
No ability to copen and close contracts on same order. IKBR lite apparently allows it only through the mobile app, but I've been very unimpressed by IKBR so far. I want to keep this as simple as possible, less chance of screwing something up.
ThinkorSwim has a nice mobile app.

Actually much easier to use than the TOS desktop app, which I find terrible..... the desktop may be good for day traders, but hate it for what I want (rolling futures). Reminds me of something from 2002.

The mobile app works great however.

I'm looking into Schwab next.

guyinlaw
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by guyinlaw » Tue Oct 22, 2019 10:20 pm

I hope WisdonTree will come out with a 60-240 ETF to go along with NTSX 90-60 ETF.

Should be fairly easy for them to implement with the same template as NTSX.

10% in NTSX gives exposure to 60% in bonds via Treasury futures
40% new fund can give exposure to 240% in bonds.

New fund would be 20-80 portfolio with 200% leverage - perfect.

(Portfolio Visualizer shows a CAGR of ~14.5% since 1992 with lesser drawdown)

Does anyone have experience with Schwab Futures account?

Is there a simulator futures account one can start with?
Last edited by guyinlaw on Tue Oct 22, 2019 11:02 pm, edited 2 times in total.

caklim00
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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Tue Oct 22, 2019 10:29 pm

rascott wrote:
Tue Oct 22, 2019 3:48 pm
caklim00 wrote:
Tue Oct 22, 2019 3:11 pm
rascott wrote:
Tue Oct 22, 2019 10:49 am
caklim00 wrote:
Tue Oct 22, 2019 9:32 am
Where is everyone doing their futures?
I opened an IKBR lite account, but they don't appear to be able to roll the contracts unless you upgrade to pro. I contacted generic trade who has 0.59 contracts but they don't have roll capability either.
What do you mean they can't roll contracts? That's odd....all it really means is that you'd do two trades instead of one, if they don't have the "roll" option.

Shouldn't be that big of deal. I'm using TDA/Thinkorswim....they have the roll option (during the actual roll period...next one will be Dec).
No ability to copen and close contracts on same order. IKBR lite apparently allows it only through the mobile app, but I've been very unimpressed by IKBR so far. I want to keep this as simple as possible, less chance of screwing something up.
ThinkorSwim has a nice mobile app.

Actually much easier to use than the TOS desktop app, which I find terrible..... the desktop may be good for day traders, but hate it for what I want (rolling futures). Reminds me of something from 2002.

The mobile app works great however.

I'm looking into Schwab next.
Thanks, I looked at IKBR (using paper simulated version at the moment) and on the mobile app it appears under "Futures Spread" (I think at least). It has a place where you set front (Dec 19, 19) and back (March 20, 20). Then click buy and a Buy Order Screen comes up with
Legs
1. Sell 1 ZN FUT Dec19'19 (1000) ECBOT
2. Buy 1 ZN FUT Mar20'20 (1000) ECBOT

But then its odd there is one spot for Limit price and it looks like you set a debit or credit amount. Do you just put in a market order when you are rolling contracts (when the volume on both futures are close)? Or do you actually use some sort of limit order (which looks very different than a normal limit order on stock purchase)

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by caklim00 » Wed Oct 23, 2019 8:34 pm

Figured out the limit order aspect, but not sure how one would go about it when rolling contracts.

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by rascott » Wed Oct 23, 2019 8:56 pm

caklim00 wrote:
Wed Oct 23, 2019 8:34 pm
Figured out the limit order aspect, but not sure how one would go about it when rolling contracts.

I don't even have the option to look at it outside of roll periods, so can't really comment until Dec. Not something I'm too concerned about. During the roll they change the ticks to much, much tighter spreads than during "normal" times . I think you'll be totally fine using market orders if it comes to that

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Re: A gentle alternative to HEDGEFUNDIE's excellent adventure with 2-Year Treasury Futures

Post by hdas » Wed Oct 23, 2019 9:00 pm

rascott wrote:
Wed Oct 23, 2019 8:56 pm
caklim00 wrote:
Wed Oct 23, 2019 8:34 pm
Figured out the limit order aspect, but not sure how one would go about it when rolling contracts.

I don't even have the option to look at it outside of roll periods, so can't really comment until Dec. Not something I'm too concerned about. During the roll they change the ticks to much, much tighter spreads than during "normal" times . I think you'll be totally fine using market orders if it comes to that
If one chooses the right time to do it, one might be able to by the bid and sell the offer. Cheers :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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