Since establishing an interim top this has been a one way trade since the beginning of May where the long end and short end of the curve has gotten hit. 30-yr bonds have depreciated 12%, 10-yr notes are lower by 7% and the March 16’ Eurodollar futures are lower by 1.3%. Lets quantify this…what are the margins for these three instruments and what this price action means for (1) futures contracts. Please do not think I am implying that all my clients got short and stayed with this trade for the last 4 months that is not the message I am trying to convey.
Initial margin – $2,750
Maintenance margin – $2,500
Close to close for 5/2 to 8/22 – $17,875
Initial margin – $1,623
Maintenance margin – $1,475
Close to close for 5/2 to 8/22 -$8,609
Initial margin – $880
Maintenance margin – $800
Close to close for 5/2 to 8/22 -$3,050
From current levels I think we get a rebound in the debt complex and I have put three charts of the instruments I trade in this complex below. I expect a trade higher in the coming weeks lifting futures to the resistance levels (the red horizontal lines) I drew in each chart. I open the idea of a rally and will use higher trade to scale clients into bearish trade into the FOMC meeting in mid-September. My favored play remains trading the short end of the curve; 16’ Eurodollar futures and options.
Over the next several years I do expect the path of least resistance in the debt complex to be lower so traders should use an advancement in the coming weeks to exit remaining longs and to gain bearish exposure.
March 16’ Eurodollars:
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As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: firstname.lastname@example.org or 954-929-9997