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

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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LTCM
Posts: 181
Joined: Wed Sep 09, 2020 3:58 am

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

Post by LTCM »

laotzu wrote: Tue Sep 14, 2021 5:28 am What I don't understand is how to estimate the bond duration as skierincolorado does above. If there is a "standard" duration estimate I haven't found it yet.
I think technically you’re supposed to work out which bond in the basket will be cheapest to deliver and then use the duration of that. Most times this is obvious (not to me but to professionals) and when it’s not you just assign probabilities.

I would also appreciate a quick summary of what makes a bond CTD.
60% VUG - 20% VEA - 20% EDV
klaus14
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Joined: Sun Nov 25, 2018 7:43 pm

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

Post by klaus14 »

LTCM wrote: Tue Sep 14, 2021 12:31 pm
laotzu wrote: Tue Sep 14, 2021 5:28 am
laotzu wrote: Thu Sep 09, 2021 3:07 pm Speaking of rolls, do you roll the future on a specific date or just "anytime before expiration"?
Still unanswered.
From my understanding you want to do it exactly 7 days before expiry which will be a Friday. This minimizes spreads, costs and market timing. This is the day that most liquidity moves from the “old” contract to the “new” one. The market is so efficient you can probably do a few days after/before if needed but that Friday is ideal.
2 or 3 days before IBKR liquidation day had the highest volume for ZN contracts.
That maps to 11/24 or 11/25 for the next roll.
My investment algorithm: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=351899&p=6112869#p6112869
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