First time? Unfortunately, no one from RV will read this thread here...

No very happy with RV and GMI. Think there is some merit maybe in a slack like conversation board (maybe per trade recommendation). Do not expect RV team to answer every question and do handholding (especially if trades do not work; which they should from with 15x return potential...), but maybe some structuring in the community (which is quite active) could be great opportunity for them? Anyway my 2cts,

Considering time decay and the trading range, right now looks like a good time to average down in the next month out.

Indeed! Where the heck is the guidance? What are we to do?

Same boat here, would be nice to get an update

We may get a boost from tomorrow’s CPI Number if deep -ve.

thanks

That makes sense. Btw, I called Saxo today and they informed me that they do not offer roll-over services so one literally has to close out the current one and open a new trade.

I second that. Would love to hear Raoul's feedback or other people's opinion in general. It seems today things started to move. I'm considering keeping June and adding some July - it's a bit of a larger position than I initially wanted but things are starting to align with rates falling, more talks about 0 rates etc. I remember also hearing that in previous crises the rebound lasted 3 months which would take us into June - enough time for people to see the issues with reopening: increasing case counts, customers offline, inefficiencies. I think people want the shutdown to end but more to go get more fresh air with friends and not get into a mall.

... are you guys following twitter ? https://twitter.com/RaoulGMI/status/1258199015126110209

JW2 W, Lots of mention of butterfly's. Was there a different trade recommendation made elsewhere?

@Matthew O. - not that I am aware of.

Just like the F'ing Dollar.

Good question. Looking for guidance!

This was asked several times on last pro video but never answered. I think that when these trade recomadations (not that many) is given, they should have a follow up. dissapointing!

I'm going to let it ride until the end of the month and see what happens, then roll into July or sept if it's not looking good.

im probably the last guy you should ask, but i asked saxobank, and to scenario 2: the bank sells it for you 3 hours before market close on exp date. scenario 1: they buy the option and thats that no? you dont have to be involved in anything else than take the profit. But, you should ask a trader:) im just watching youtube, and trying this as a hobby!

Thanks Jens!

The guidance probably lies in 'if you're lucky'. No luck you loose on this one.

And I would guess that getting a price for 0'020 is better than getting it for 0'040?

4/64ths means 0'040 for the 5 year note.

Hi Gerti, I am sorry, according to CME (https://www.interactivebrokers.com/en/index.php?f=25228&course=33&cat=1 , see Lesson #6), 0'020 is equal to 2/32nds, so 4/64 would be 0'020.

Hi Gerti, disregard my last comment. Since this is a option and not a futures, I can confirm that the price is in 64ths, so what you want is 0'040 (=4/64) for the call spread.

Quantity 1 means 1 call. The error message just says that you can't see real time prices bc you didn't subscribe to it.

Buying and selling 1 call each doesn't sound like much of a position. Am I reading this wrong?

ticker is /ZF on thinkorswim

As Matthew said below find "/ZF", then click/touch "Options", and then find the 126.50 strike and select the calls. THEN: touch "ADD OPTION LEG" and go down and find the 127.50 calls, and make sure you're selling those and buying the 126.50. You'll then have a vertical call spread set up, and you then just have to decide how many and at what price to bid for the spread. It executes both the buy and sell trades as a pair. Should be all set.

You buy the options contract on the June 20th futures I think the option on the June 20th futures contract expires may 22nd. I hope I've worked it out correctly. I'm going to double check & research this weekend. When you buy it, it should say June 20 in your account. But remember it expires may 22nd This is my understanding and I could be wrong.

Raoul wrote below that, “the expiry date on the call spread was June 2020.”

Ouch. I'm really confused now honestly :'(

Hey guys, after all of the discuss about this on the day of the trade release I went into the May 22 options expiry (this is on the Jun futures contract). Since then in the long post just below I have come to the conclusion that we want the Jun 26 Options Expiry (this is Sept Futures contract). This gives more time for rates to drop and at this point is much safer, perhaps we get rate cuts today (though not expected) in which case amazing. If not I plan to roll my contracts to the Jun 26 expiry, volume would have moved over by now or soon anyway. All thoughts welcome, have been battling with this for a while too.

@Harry M - it would be great if you are able to please confirm Raoul's original thinking, 22 May expiry or 26 June expiry? There still seems to be significant debate/confusion around what this is/was. Thank you

https://www.interactivebrokers.com/en/index.php?f=2222&exch=globex&showcategories=FUTGRP

On IB Real future is BRE

Thank you!

Hello @IvanBiletsky. I also use Schwab. Here's my interpretation. 1) The security I'm using is FVM20, which is the June 2020 futures contract for the 5 year treasury. I chose the June contract because the later September contract has no open interest in its options chains. 2) I then use the call options chain with May 22, 2020 expiry ... the only available choice, other than options expiring April 24. 3) Selecting the trade ticket for futures options call spread, I entered the BTO (buy to open) for the 126.5 call and STO (sell to open) for the 127.5 call with a limit on the buy side debit (the cost to me) of 2.0, which is 2/32 - equivalent to the 4/64 Raoul suggested. Further down in the question thread, I see that someone asked why one would sell the 127.5 call. The purpose is to defray the cost of the 126.5 call, at the 'cost' of reducing upside potential for the trade. Again, if I've erred I hope that someone will provide their thoughts.

@Raoul, would you please confirm that the thought is to use a vertical call spread expiring May 22 for the June contract on 5 year treasury notes? I notice that options expiring in June for the September contract now have some open interest, but the spreads are much larger than 4/64. Thanks very much.

Mike, really appreciate your time. Even I can understand your instructions :) So you're not concerned that May 22 is a bit too close for the trade to play out? Ivan

Mike, can you please clarify re "limit on the buy side debit (the cost to me) of 2.0" I put 2.0 and my order had been cancelled with the comment "check price". Maybe it's supposed to be 0-2.00?

Hi @IvanBiletsky. Sorry if I go to far in spelling out my thoughts sometimes ... it's just a habit. May 22 is indeed quite close, but seems to be exactly in line with Raoul's thinking. I am looking forward to his confirming this. He did say in a recent video update that the time when yields may plunge is likely quite close, which would seem to corroborate my date assumption. Since capital risk is modest using the vertical call spread approach, and since the options may be able to be sold at a later time to recover some fraction of the risk capital if necessary, I am comfortable dipping a toe into this trade pending Raoul's confirmation of the May 22 expiry target.

Hi Ivan. Yes, you're correct -- on the Schwab trade ticket using the selection 'Futures Options Spreads' (which ties the buy and the sell) I use order type "Limit/Buy" and the Debit field specified as "0-2.00".

Mike D, I agree your first comment.

Thanks Mike D. I would have had a hard time figuring it out without your help.

Hi guys, This thread has been very helpful because I use schwab as well. I setup the trade, but I'm not getting any bids on the open market? Is it because the spread differential is now 0-3.50? for clarity : FVM20 BTO : 5/22/20 126.Call Call FVM20 STO : 5/22/20 127.5 Call Limit/Buy Debit - 0-2.00

Hi Philip, Yes, Mike D. did a brilliant job explaining how to execute this trade on Schwab. It eliminated so much second guessing for me personally. My order at 0-2.00 haven't been filled in either, but 0-3.00 got filled. Looks like price has already moved... hopefully you will have a chance to get this trade going. Good-luck! Ivan (@IvanBiletsky)

Thank you Mike, for explaining so clearly!

@Ivan, @Rohan, @Philip, @John --- to wrap up the conversation, please note that elsewhere in this thread @Raoul P. is specific that he is speaking of options which expire June 2020, and not May 2020. His specific words: "You buy 1x of the June 2020 126.5 calls and sell 1x of the June 2020 127.5 calls" Wanted to point out this important difference to you, for clarity,

@Mike Thanks for the clarity. This whole process was quite confusing haha. So instead we buy Call option spreads on US 5 year T Note Futures for September (FVU20) with Option expirys for June 26th?

Hi @philip. I can't / won't give advice to anyone else, so I can't say what you should do. I can, however, confirm that what you describe is what I did for my own personal account. Good luck!

@Mike Completely understand and I understand the risks vs reward! This is all on me :) I appreciate the response.

Thanks Mike for the update. Yes, I can see there's lots of confusion. Mike, did you buy new June options for FVU20 or you rolled your FVM20 option spread to FVU20? What makes more sense in this situation?

Hello @Ivan. For the strategy I am using for my personal account, it made more sense to roll forward.

Thank you Mike, appreciate your response!

I've reduced my position but still left some on the table.

June

Raoul, my husband and I just put $5k into the call spread but we're debating about whether you meant for it to expire on May 22nd. We just read all the comments on here and it's still not clear.

I think you could use a judgement call here. I would probably go with the June 26th if you're leaning towards a less aggressive drop in yields. That just means if the move to negative yields happen sooner than expected you could have a choice to leave a little bit of money on the table but close with a hefty gain.

I was making a joke but less guessing would be my trade recommendation lol.

A bit of a bumpy trade as a new pro subscriber. I've bought both expirations..

I believe Raoul clarified to buy the Call options that expire in June, which would correspond to the T note futures for September (see other comments). This would be ZFU20 on your platform. Other people made this same mistake (as did I), and we have rolled over to September. I believe your trade has higher upside, but the time frame is quite tight for a may 22nd expiry. I'm more comfortable with the additional month (less upside).

Philip I don't think so. I think he's talking about the may 22nd expiring one.

@Max W I guess it'll be up to your own interpretation, but this is how I took it after rereading: Expiry refers to the Options spread, not the T note futures. Raoul : "Just to be clear... You buy 1x of the June 2020 126.5 calls and sell 1x of the June 2020 127.5 calls. Usually call spreads are priced as a "package". This means that you can only lose the premium. So if you buy $1k of calls spreads, that is all you can lose. You can potentially make $15k, if you are lucky" Also Raoul : "Sorry, the expiry date on the call spread was June 2020"

Which positions? Julian's EWW and XME calls paid off this week. I'm letting them ride. That's enough risk for me.

Same here. Great questions. I went out a little bit into July with my positions. I don't feel qualified to answer, but I reread the analysis several times and it made sense. The crash in economic productivity in the last few months globally has been stunning. Everything is crashing faster and harder except for what the fed is allowing to be priced in corporate credit and by some extension stocks. I'm hoping Raoul or one of the other participants will give you a better answer than I have. I'm still learning the ropes but I've been trading a while now. I don't think this trade is a sure thing but it has a nice risk reward scheme. It could very will turn a handsome profit. I wouldn't want to hold a large position in this trade. Just a small one perhaps? That said, I bought about $8k worth of this trade

I know from Komal Sri-Kumar, that Bond Yields are a function of Inflation expectations and real economic growth expectations. To follow on from my questions above, are we expecting rates to drop due to earnings and PCE data pointing squarely at deflation and economic slow down?

Max, thanks for your reply. I also can see the shear devastation of the real economy, it makes sense that we would see lower rates if deflation starts to be priced in. Saying that I was confused by the figures in the report of +4.7% real rates, can anyone explain it. I was reading into R real = R nominal - Inflation but am unsure how to get to +4.7% I have read most of the comments but sorry if this is treading over old ground.

I have no idea (besides what he wrote) why Raoul thinks this is a good trade. If I have surgery I don't know why the doctor does what he does. I'm ok with that. Impossible to substitute 30 years experience in a few pages.

The sense I get from this thesis is it's simply a risk/reward opportunity to take if you can afford it, and the 5/22 timeline lines up with 15x upside pending very logical short term conditions driving up the 5yr, with capped downside...now that I say it, it sounds like the concept of trading. Haha

Of course, I can't speak for anyone else, but as to the mechanism, it's purely supply and demand. If there is any hiccup in the Feds plan, or the perception of the plan, then risk assets will get sold (credit, equities, etc.). That money will look to go somewhere for a positive return. The Fed is eating up a lot of T supply and any increase in demand outside the Fed could push rates to zero. Of course, the participants in risk assets are very much looking past this shock as a brief one off event. The amount of stimulus so far exceeds that of the New Deal from the 30s as a percent of GDP. This is enormous as the damage is no where near that currently. This is all very precarious IMHO. Also, he was advising on the June expiration, not May. He confirmed in the comments and you can see that from the price he mentioned. Stay nimble.

Matthew, you wrote: “the time scale is so short for expiry on 22 May.” However, Raoul wrote below that, “the expiry date on the call spread was June 2020.” He repeated that it is June in at least two other places. Matthew, you also wrote: “Why Raoul are you so certain that this is enough time?” What Raoul and Julian are offering are probabilities. I doubt either of them would ever suggest that something is “certain.” I see that as an important distinction, which ideally guides one both in whether to act on a suggested trade, and to size it appropriately – i.e., with an awareness that a probability that something will work, includes a probability that it will not work – e.g., 60% probability that it will work, includes 40% that it won’t.

Hi all, firstly thank you for your reply. @Didier V At this point this is all learning for me, I don't expect to have my hand held as such, though i would like to learn a framework. I know we all have different levels of acceptance too which is fine. This platform does offer an edge on the market via every piece of content and I am actively trying to put the pieces together for myself for the future. @Anthony E. I can see that perhaps it's just a pure R.R. play as the setup might be great, I just want to know that. As I'd love to be able to monitor it myself and take any profits on moves that happen where appropriate to the overall situation. Especially as my trades are 22 May expiry I don't want to let the time decay on the options kill them, if we don't see a lower yield the price spike may not happen in time. @Geoff P, thanks for your explanation. I can see that we have potentially two factors then, the market forces and the Fed actively cutting on Wed, I guess time will tell. @Geoff P , @Raymond E. Regarding the Expiry, having read through the comments before making my trades I came to the conclusion that ZFM0 the underlying Jun futures contracts was Raoul's meaning and the expiry for this is 22 May. At the time it was the only contract with signifcant volume & that offered 15X on investment. The Sept Contract expiry '26 Jun' did not offer the same R.R. ***If I have misunderstood this, it appears many others have also below so some clarity would be useful.*** @Raymond E. I agree with your point regarding the trade, perhaps my use of the word 'certain' was incorrect here. I meant to question the short time scale and why this was chosen vs the Jun expiry (as i understood it). I assume this is with regards to @Anthony E's point that it is the trade which offers the best R.R. Thanks all.

Hi Matt when I got this note the mid point of the spread on the Jun expiry was 0'022 (2.25/32 or 4.5/64). That's 12x. The mid point of the May expiry was 0'015 (1.5/32 or 3/64). That's 18x. In 64th, the June was 1 tick away and the May was 2. It seemed more reasonable to me that he was referring to June and I didn't have to sacrifice that much capital to over double my holding time. In the comments below he confirms June. Why the options chain quote not read June for the June expiry? I have no idea. Probably the same reason some brokers quote these options in 1/4 of 32nds and some quote them in 1/2 of 64ths. lol

Geoff, when did you buy the spread? I bought within about an hour or so after the recommendation was published and the June expiry was definitely not that cheap. Has come down a lot now though.

Around noon on the 23rd. If you look at the bar on zfu20 on that date it had a much wider range than the front month. Price when I executed was 125'065.

Some thoughts on this. In 2008, one of the reasons why bonds rallied was that the Fed was cutting rates. Raoul was pretty explicit that he expects rate cuts, and I think he argued for negative Fed funds rates (because inflation may well become very negative). But even if the Fed doesnt cut rates to negative levels, Fed Funds may anticipate the possibility of negative rates. I notice Kocherlakota argued for negative rates recently. Speculation of negative rates is enough in some environments. Also in the scenario that Raoul is describing, reasonable individuals would be desperately keen to find places to leave money that were safe. Thats why negative rates have been possible globally. Widespread defaults on previously considered safe securities (think CMBS) might well prompt a rush to "quality". Where exactly would you store wealth to keep it safe if you started to see a lot of defaults a restructurings around you? Would you prefer to lose 1% of your wealth or 50%? Real rates are nominal rates minus inflation. So if inflation was -5%, then nominal yields would need to be -5% to give you zero real yields.

Thanks Harry. You sir are a gem

@Geoff P. Thanks for the input, honestly you may well be correct here and the longer time to expiry is useful. Having re-read all of the comments it does seem that many people have expressed their view of May 22nd Expiry. I can read June both ways at this point haha. When Raoul says June then he would be referring to the Options Contract expiring 26 Jun on Sept Futures Contract. @Harry As always appreciate your time answering our questions here, I understand your explanation and imagine that without a specific rate cut tomorrow we will be waiting to see how the markets react to the any deflationary data and defaults etc. For complete clarity can you clear up for us all what exact contract Raoul has recommended? This might seem a bit noddy, I have been reading into this for a while and still don't know if 'June' in this context refers to the Futures or Option expiry. I am now leaning towards the later date for option Jun 26th expiry on Sept Futures, but many have also argued for the May 22 in this chat which i also own.

Yes, I think you can argue either way but I looked at it like this; the pattern (a significant weighting in the trade decision it would seem per Raoul's post) hasn't confirmed yet. When I trade a breakout, I will go in in one lump on confirmation. In this instance there really isn't enough meat left to wait for the confirmation so I don't mind entering early (higher probability of failure, but the payout more than makes up for it). When entering early, I always nibble over many buys and potentially days. I'm a very conservative investor and am perfectly fine missing out. As it stands I was able to get full exposure to this trade for less than the recommended price with the June expiry. Sometimes it goes the other way and I'm under allocated. Sometimes I sit out all together because I don't agree with the thesis, or the risk reward profile isn't good enough for me. In the end it's a recommendation and I'm ultimately responsible if things go south, so I manage risk in my own way. Best of luck!

Geoff, Thanks yet again for your insights in how you are taking the trade recommendations here and applying them your own strategy. Definitely food for thought, much appreciated. At this point, I have changed my view and agree with you that the options contract we want expires on the 26 Jun. It just so happens to be the Sept Futures contract. I will be waiting to see how things move this week and roll my positions to Jun. Matt

*choice

I will make the assumption the Fed Meeting tomorrow will be the catalyst?

Nice! I'm going to check that spread out

Nevermind. It's 4X return. My bad. Amazing what a walk in the sun can do,

Hi Dwinanto, Find me on Twitter on @SteveSingfin and I will help you with screenshots. This goes for all others who use Saxobank.

Thanks Steve S. for your help If anyone wants to find me on Twitter I'm Grey_Ghost_

Thanks Steve, I've setup 1 leg on Saxo to expired on 22 May, I'll probably just roll over if I'm wrong

@Dwinanfo, sounds like you are in the wrong recommended trade. It seems you are trading the futures. The recommended trade is Future Options. OZF is the ticker on Saxo.

I'm trading future options, on SAXO the ticker is OZF but if you check carefully the underlying is ZFMO. On TD Ameritade they use /ZF and I think on Schwab they have FV (you can check the CME site to confirm this) my ZFU0 (expire in June) is already gaining while my OZF is OTM . I was testing different system & did position sizing to manage risk.

When you signed up for RV PRO it said that the service is for *experienced investors*. If you can't figure out how to set up a simple option trade that's on you.

Jamie, I too am new to this game, though I would say that if you have the time to learn there are some great videos on YouTube to help you learn about options and how to use whichever trading platform you have. I was surprised by how simple it is overall, of course pricing and timing of options seems little more complex etc, however with Raoul's specific trade you may find that you can follow some tutorials on YouTube, additionally the CME has some great learning videos to give you an understanding of what is going on. Good luck with your trades here.

Hi guys, it would be great if you could post the links to the the educational videos here. The little research I have done so far has provided some contradictory inputs. And when you are new to the thing, it's hard to distinguish the right from the wrong. Thanks

Gerti D. In terms of videos I personally used the CME YouTube channel to get a lot of the basics. I have also used the Interactive Brokers videos for specific brokerage details.

Be very careful my friend. I have no idea about that. It's very likely that etf holds a basket of bonds and not just the 5 year bond.

The ETF does hold a basket of bonds. But it doesnt invalidate the broader argument. So I would argue you can. Just remember that entry price matters. Dont overpay.

Yup they really f’d me today. Had a helluva setup in the overnight going. Re-entered in the afternoon, and then they squeezed that to death in the final hours too.

... and the euro continues to rise off of the critical support level (after dipping down to kiss it) behind Raoul's trade. It's now up to 108.886. The last time this happened members were on this board talking about 70%+ losses on on their options. One wonders whether the central banks are watching that same support level and doing "whatever it takes" to prevent the euro from falling below it because they damn well know Raoul is right that horrible things will happen if they don't. One also wonders if one should wait and buy the euro puts if the euro hits about 110 (with automatic sell to close orders down near the critical support level ... 107.8 or so). The market drives it down until central banks drive it back up.

Sorry Jens. I'll hit you up tomorrow. Don't worry. The trade has sold off over the last couple days so you're going to get a good entry. It's ZF on interactive brokers. Just buy the June call at strike 126.5. I wouldn't even worry about the put leg at this point. The call is cheap enough right now

There is no put in this trade. The second leg is a short call with a higher strike.

I meant call. Sorry it was so late

this. good luck

To add to the mess of these anchronistic units, for strike prices they are expressed in 32nds, while the option prices on these contracts are denoted in 64ths. You can observe this by checking calculated premium price (say 0'05 corresponds to 5/64*1000$=78.13$ per option), and by checking the label of the contract before the order before it gets confirmed (126'16 > 126.5).

Anyone have solid broker recommendations to do options on futures besides IB/saxo...the pretentious -"I'm so smart and know the best info but I'm not gonna tell you; do ur hw winky face"- act is so annoying and overdone in finance.

I don't recommend brokers because they all suck. You have to compromise. I love the ToS platform e.g., but their options pricing model is weak. I need to model vomma. You can't trade eurodollar options. I love how I can enter one order on IB and allocate to the various accounts I manage. They have good product offering, but make you pay for data. I hate their interface. It's like using dos. I use 5 brokerage companies including a full service one. Nearly every major brokerage co will be able to get the job done on futures and options. You have to find out what you're willing to sacrifice, and what you won't. This will only come with experience. As you open accounts, you'll likely open more accounts and/or move accounts, etc.

TLT is a 20+ year etf, and from my perspective we're trying to capture the movement of the short-intermediate term treasuries. IEF is 7-10 which is more of the correct range we're looking to capture. I've personally really liked the play on the 5 year for a while, I think we will see huge movement there. We will in the 10 year too, but Raoul has been long 10 years for a while. Just started adding 5's.

Literally all of these questions have been answered in the various comments on this page mate so study those and you'll get there

Even a genius needs help to learn how to ty his shoelaces so don't act to blasé please.

Ben - an option gives you the right but not the obligation to exercise it - so you won’t be forced to buy the futures unless you want to - typically you’ll just sell it off (ideally at a healthy profit!). I think based on some of the comments below the price of ZF at an interest rate of 0 is around 127 so that’s why Raoul is suggesting the call spread he does. Good luck!

If the ZF will rise enough you should not sell one. If it doesnt rise as much as we think then reducing the cost of the position is to your benefit. Ultimately call spreads make sense when you dont believe the underlying can go a very long way higher.

Good comment, Peder. It would be very interesting to hear why you are negative to the Norwegian Krone and which time frame you link that view too.

Norwegian Krona is heavily dependant on oil and European economy. Country is not very competitive in most industries and has a large social welfare program. Has had a booming real estate market that has begun unwinding. Not trying to be overly smart. Just see it as a more straight forward USD pair trade than Euro that might bring unwelcome surprises.

Thanks Peder!!! The NOK has weakened a lot. If the real estate market trips, that would definitely be negative. It is likely too. Oil and gas prices should go up from low levels. Also the fiscal part is sound with a trade surplus and a $ 1tn SWF. Maybe the market will appreciate that further down the road. Good luck!

There is a Euro USD future on IB, and it does have options. I dont know regarding yen

I just entered the trade today. It looks like it's going down in value a lot. But I think Raoul's reasoning for the trade is sound. It's sort of a long shot but I like it

Agree, particularly impressed with Varun’s passion and high energy. Comes out clear in his writing style.

sorry, only down 49%...going for an even 50% before I average down ;)

I wonder the same question. How high could the ZF price go?

Hi Steve, Harry answered this question down near the start of these comments. "Harry M. | Real Vision Apr 24, 2020 @ 06:31 2 0 So I cheated (used a bloomberg terminal) but I can tell you that the current futures price is a yield of about 34bps. 126.50 strike is about 21bps away - so still positive. The 127.5 is about 41 bps lower, so a negative yield."

The June 2020 expiring on May 22 or the July 2020 expiring on June 26?

29 days to expire, what catalyst do you see in such a short time horizon for this to trade to work? I see it can't be done with more time so we don't have much of a choice but I like the risk-reward so I'm in! Yet, I will bet in a GTC order to close at 50% of max profit, I'm not greedy.

I'm a little surprised at the aggressiveness of the timing call. June options expire May 22, so we have 1 month for this to get in-the-money. Why not give it 3 months (more expensive, I know)? What makes you want to pick out this next month for the inflection?

Hi Winslow. You can take some risk off once options start making money. Don't need to wait all the way until May 22nd.

Hi Winslow, Looking at the chart would suggest that there is a big seller sitting on the market at around 125.160 Yes - the option expiry is very near - but if the seller is finished in the next couple of weeks then the chart looks ready to explode higher and fast. This is my understanding of the trade, FWIW

Great question, I am a newbie to the space but have been additionally buying EUR put options myself since Raoul said to short GBP & JPY. I have been buying for Jul and Aug 20, also a few different Strike around 1.05 as I'd heard a target of parity. Recently even lower. Also interested if others are doing similar.

Hey Elena, I was having trouble with the same question. I use IG for a spread betting account (they offer CFD's as well). IG charge overnight fees just like normal on spot price spread bets and CFDs but they don't charge any overnight fees on their futures or forwards. Instead, they've added the extra fee into the spread so you'll know at the start what your full costs will be. Currently, they're offering a June 2020 contract for EURUSD and June and Sept contracts on USDJPY which it looks I'll be buying. On USDJPY Sept, the spread was 23 pips when I last looked. It's honestly impossible to work out an estimate of what it would cost to hold a trade in USDJPY until Sept (I've spent the last 30 mins trying) so I'm going to assume the forward contract is the best bet. I'll explore the Options option as well and see what comes out

Varun was meant to be in there too!

I have no idea but I'm going to check tomorrow when I enter this trade. I'm using interactive brokers too

It’s due to SPAN margin requirement, have a google

SPAN margin is only supposed to apply to options writers. I always thought I wanted an IB account now I’m not so sure. I think I will stick with TD since the TOS trade plateform is great.

I assume it's because the underlying is a futures contract. So if you were to exercise the option you would enter into a futures contract which requires a margin.

See if this thread helps https://quant.stackexchange.com/questions/31383/why-does-buying-future-options-require-margin/31390

There is alot of open interest on these contracts now since this release (from a few hundred to now over +20k on IB) worries me of counterparty exercising early or shenanigans to clear out weak hands...

20.000 contracts is less than 1.4 million dollar. Isn't that peanuts?

Hey I just bought about 155 of the call leg. Interactive brokers required I hold 10 dollars for everyone one dollar I sold of the higher call leg. So now I'm just long the 126.5 call. No calls sold for me

With IB mobile: Search ZF. Go Spread Template. Choose 22nd May expiry, at the top. Select 126.5 and 127.5 Calls. Click call legs at bottom, make sure the 127.5 call is set to sell. Then order

In TWS: select ZF future, then click on option chain and turn on strategy builder. Now you can select your legs of the trade. It will get priced as a package.

Thanks for the help Dean and Moritz. that all makes sense.

Yes the combination is right (buy the 126.5 call and sell the 127.5 call) but I get no price at all for the combination in IB. There is no bid nor ask. Or the volumes may be too low. The trade seems not too liquid and the fees on IB were astronomic : 44% Not sure if you guys got the same fees or is it just me?

Regarding the Price data, I have found that you might need to check your market data subscriptions or Permissions for the contracts, or just out of hours i guess. Hope it helps.

Elena, this could be the case and why Raoul hasn’t actioned buy on gold... it’s kinda follows his logic

but at the same time dollar rates going negative is quite bullish for silver and gold due to Dollar weakening, no? Why? - Cause negative dollar rates should ease Dollar cash demand as a risk off currency - Cause relative to other currencies dollar then will have to weaken due to rates parity condition - Weaker dollar -> supportive of gold and silver normally

Dollar is going higher due to shortages worldwide before it will go lower. Raoul is bullish on dollar.

I learned options theoretically while preparing for CFA2, it's good to have a chance to try them out practically now under professional guidance. This trade already showed me that directional bets are best executed with options, especially when not so many people understand the direction, and thus option prices are cheap, allowing for a great risk/reward asymmetry.

Thanks for bringing this to attention Simon - super useful charts, will check their daily podcast as well. Top effort by them for keeping retail investors informed. Not sure about other Saxo users, but I think the platform is decent and intuitive (vs IB from what I hear). Although I will open an IB account as well at some point for my UK SIPP.

Excuse my ignorance but 8.30 am Frankfurt, London or NY time?

IB and Schwab have them. You need a futures account.

Saxo Markets Australia

Frank, I'm in Australia too and I'm using Schwab account with margin to trade futures/options. @IvanBiletsky

Hi Frank, I'm in Aust. but use IB like any other international or US investor (and with its margin limitations)

Great idea.. it might keep the discussions cleaner and on-topic to the video itself! @Realvision? Also, once I post a message I usually forget to come back and there is no alert if there is a follow-up comment.

@Melvin Exactly! If I post or comment I have no idea if/when someone replies back! Or even if anyone has seen my message....

Yeah I was also thinking how great would that be to have a Forum section somewhere on the site. Also, during the live videos there are great questions, but unfortunately those disappear when the live video ends.

Awesome, slack channel or something!?

regarding 2), my take is that it really defeats the purpose of blockchain de-centralization. According to the article, China seeks to build an infrastructure-of-infrastructures where the underlying infrastructure still controlled by them supposedly.

I believe we are looking at the may 22nd expiry, the day this update was published, this was the only way to achieve near 15x profit.

Only a Brummie would get the screw-fix reference!!

I'm a Brummie and Proud lol. Loved the Screw Fix reference lol

What platform are you using in UK? Love the screwfix ref!

@Ian. Saxobank

Yep I'm with IB too, same!

Yes, i bought 126.5 calls but after having bought some i got a margin message. I don't understand the margin concept and their platform is damn complicated.

to have option positions on IB, I think you might have to have 2k USD in cash at all times

Didnt see this before posting my message above. In the same boat

I am having the same problem right now, which would be the first time I see this happening on IB over thousands of option trades. Will check on Monday

US sub, I use TD no margin required. I also use tastyworks they understand spread trading as well, no margin required here either. Also if your new to futures and options a great place to lean is tastytrade.com they have great beginners shows as well.

Tim, I'm guessing the difference is that ED settles at LIBOR rate in the end. There's no LIBOR involved with Bonds trade

The issue with Eurodollars is that they r almost at the end of their move, very little juice left to squeeze. The risk to reward isn't there unless LIBOR goes strongly negative, and Bonds contracts offer a better expression of the same idea now.

You mean Norwegian Krone...

short positions (the 127.5 sell) requires margin, so even if it is a spread, IB might be giving problems because that is how the system works. After all, if you bought the spread, and then sold-to-close the 126.5 call, you would be left with a naked 127.5 sell, and IB is wary of this.

Not the kind of questions you easily find an answer to on the net. Raoul's recommendations are out of my confortzone but little by little i learn new things. A 'how to' video would be useful, as RV did for the eurodollars trade. Very juicy trade that was!

I called IB and they told me if you have 100 dollar cash in your account you can buy those calls for 100 dollar without margin problems but it's definitely not true because after i spended 50 dollar the computer said no.

Varun - Thats what folks are trying to do on these boards...learn. You wrote about margin requirements due to American style early assignment risk but in that case IB should just exercise your long call to cover the short call early assignment. I just see no scenario where the position would become a liability to IB and require margin unless Im fundamentally misunderstanding something. If I am, I would love to learn why the margin is required.

Thanks for your reply Mathew, I suggest phoning IB and talking them directly and they will explain, my understanding is that there is an exchange risk to them if the short leg is exercised and they can not immediately exercise the other leg because the assignment occurs overnight so there is a one day borrowing charge. It's a subtle point but that's why it's better to just get a direct answer by phoning them and checking their website for margin reqs of a long call spread (which states it quite clearly) then you can move on and buy another bet to express the same thing instead losing a whole day because their answer isn't what you want as you watch the prices slip away from you no?

This is what was explained to me over the phone by someone from IB, in this case I see it as more optimal to buy only the 126.5 call and eliminate the margin requirement for the sell of the 127.5 leg, as I can then get more exposure to the bet for the same cost as I don't need to post margin. Please of course correct me as I may be wrong but this is my understanding after a lengthy phone call with IB!

If the vertical call spread is in the same account then there should be no margin as you have your long 126.5 call to fill the short 127.5 call.

The other consideration on this bet is asking yourself how much upside you are targeting, with a call *spread* you will outperform underneath the break-even point of upper strike + upper strike premium

Hi Jim S, Thanks for your response, yes this is what I thought too and I put this to the IB trader over the phone and he explained that there were some factors that meant a margin would need to be posted, the TWS software also shows margin requirements for IB when attempting to put on the call spread independently. He explained that it shouldn't matter which broker you do it with but since this was an American-style option it would be the case

I wrote out all the strike prices and net profit/loss for the bull spread, if my workings are correct then the call spread outperforms between 126.5+(debit) as you lose less on the downside whereas a long call would outperform past that. Assuming you can get a debit of 0.2 on the spread that's 126.5-126.7 which interpolating from the table for approx yields below would be target of roughly 0.15%-0.19%, so if the yields fell there instead of going all the way to 0% and negative then the call spread would outperform the long call but if yields went all the way negative to Peter L Brandt's/Raoul's target of -0.20% to -0.30% then a long call would outperform (if my maths is correct and *if* the yields below in the table are accurate which I haven't double-checked!)

Of course this is only relevant if like me you are having to front up margin for the short leg of the call even though you are buying as a package, if you are only paying the net premium (and if you're on IB I'd love to know how!) then you can of course buy more contracts for the given cash amount using the spread as you are being reimbursed for the 127.5 strike

re. margin on IB for the call spread - they are requiring margin 10x the value of one spread. Been up and down IB on this with no luck-are others having the same issue on other platforms?

Hi Ian, Yes this is what I was alluding to in this thread, it seems like they don't net it unfortunately, whether it's just them as a broker or this particular option I am not sure about. Since this is an American-style option then it might be because theoretically someone can exercise the sell part of the leg before expiry requiring the margin

I just don't have a strong view and Im not informed enough about Real Estate to form one right now.

Thanks, Raoul. That's straight talk and much appreciated! :-)

Hey again Raoul, I would actually encourage you guys to someone on RV who could speak to the topic of house prices. For many people it is a sizeable share of total exposure and therefore also well worth considering, if we maybe facing a deep depression scenario. Personally I would love to more about this. Thanks

Did the same as you! Might need to look at other options that Saxo!

Hi Steve - grateful for all your help am in on both trades, I hope the timing is right. Best of luck and stay safe

Long the same UUP calls as well, happy with .17 entry. Intrigued by the risk/reward on those 5yr note trade but I've never ventured beyond vanilla options.

Thanks for the clarifications throughout the thread Steve, appreciate it as I'm still figuring out the Saxo platform. Best of luck with this trade.

Hey Steve, thanks for posting this for us Saxo platform users. So you did not sell 127.16 call options as R suggested? Because of associated leverage? In Saxo when I tried to place the buy at 126.16 using OZF ticker and expiry was May it did not explicitly say anywhere that this is a June option. Where is it supposed to say/note that?

Hi Elena. Please find me on twitter and I will send you some screenshots of the saxo platform. @SteveSingfin

@SteveSingfin followed you just now but can't message...something with your settings I think

Good question. I presume he means June contract expires on May 22nd but will let him clarify.

I believe the reference is to /ZFMO, May 22 exp (June)

Check that. September has no option chain. October?

sorry you are right... was Oct so Call 92 for Oct is @ around 0.45... I think that would be the best option for people who don't do futures...

Hi Kos, I am based in Italy. If you're in Europe, then IBKR is hands-down the most evolved broker out there. Yes, the TWS is daunting, but it lets you do everything. DeGiro is good if you want cheap and only really interested in stocks - but it isn't comparable. Saxobank is somewhere in between, but watch out I think they are marketmaker rather than sending all your trades to market.

If you can open a Schwab account their web platform is very simple to use - much more intuitive than TWS. Can only trade US markets though AFAIK.

Raoul is by his own admission a long term investor, I cannot speak for him, but I would suspect if he's telling you to short EUR then he's not expecting any significant upside by definition. If you're concerned about a little bit of volatility then wait for a bounce and get a better entry, it might never come, but at least you'll feel safe on the sidelines.

John I have similar thoughts and I play it as Adam suggests below. Got a position, if there’s a pull back will add more, if not will ride with my small position. I also use Hedgeye’s risk ranges as a guide.

Hey John! I've also learned a lot from Hedgeye. One thing I've realized is that I am not obliged to get in the position all at once. Ok, there is an idea to short EUR. I accept it, I took went in a bit yesterday, if timing is not perfect I'll add at lower price today. If the thesis is the same. If the thesis has been changed I might consider closing at a loss, but nevertheless I do not put all the money at risk. Risk Ranges go up and down, the upper bound might be somewhat lower today....

Yes

What expiry month are you looking at?

My figures are for June. But seeking Raoul's clarification on my original comment to see if I got it all right?

Which instrument are looking at on Saxo? Thanks but probably silly question.

@Saad. It's OZF on Saxobank - Change month to June. Buy to Open - 125.16.0 (this is 125.5 Raoul quoted) priced at 0.18.5 per option or $290USD premium per option and Sell to Open 127.16.0 priced at 0.01.5 or $24USD premium per option. You buy equal amounts for both i.e. 100 options 125.16.0 and 100 options for 127.16.0 Someone please correct me if I'm wrong

Hi Saad. My quotes for 127,16.0 are wrong.

Looks like I can buy the call but can't sell a call at Saxo - wrong investor type :)

Anyone on Schwab platform because it doesn't show this price unless I'm looking at the wrong contract

Raoul said 'You buy 1x of the June 2020 126.5 calls and sell 1x of the June 2020 127.5 calls. Usually call spreads are priced as a "package". This means that you can only lose the premium. You mentioned 125.16. Thats not the right one.... maybe 126.16...

Also on Saxo BTW and total cost was $105,75 for one spread.

Careful with Saxo, the margining is done leg by leg I believe, not for the spread as a whole...so you may be stopped out if you size things incorrectly. Also, it's american optionality and physically settled... so you may have to source a bond if you're exercised and it may not be the CtD that you'll get on the other leg.

Hi Simon, Yes my figures were wrong. On the Saxo Bank platform, Buying the 126.16 calls no problem but a bit confused on the 127.16. When Raoul says sell 1x 127.16 on Saxo Bank is it Buy to Open or Sell to Open?

Nevermind I figured it out. Definitely use limit orders. Schwab had this as 8-9/64 spread for a while

Many thanks @Steve this Very helpful. Am a bit concerned about full my exposure re Saxo. Is it only the premium? As per @Christopher comment above. Any views?

Hi Saad. For simplicity I just bought 126.16 calls on Saxo and didn't bother with 127.16. It's a bit complicated selling call options on Saxo so I just kept it simple where I know the maximum I can lose is my premium on the 126.16 calls.

To Steve S - thanks a lot for the confirmation. I am on Saxo as well and was looking at this but was not entirely sure, so your explanation helped.

Raoul wrote to buy 126.5 not 125.5. You won't be able to get 125.5 for anywhere near the 0'04 price

Steve, yes 'Sell to Open'. I only know it as a 'Call Ladder'. You are buying and selling same Option Chain to protect your losses if you are on the wrong side.

Thanks for all the help Steve. I’m also with Saxo out in Singapore. I managed to get the trades on. Only thing I would say is it’s a shame that the Saxo platform doesn’t offer the spread under a single trade-ticket. Like you I would to execute the buy and sell orders separately. Also the price of my buy leg was 0’05.5 -which I have to accept because I’m late to the party.

Yes

Thanks C S.

It's options on futures... see Raoul's response to David M. comment below

Hi Didier - I had this issue too (earlier today). In Interactive Brokers, select ZF Futures Options (then select you June 2020 Call with a strike price of 126.50.

Maybe read up a bit more before you start messing with call option spreads.

Alex I know what options are and the strategies. I don't need to explain this to you as you're obviously a genius, but for others reading, there are retail investors like me in here that don't have access to trade exotic assets, and may only be able to trade options on ETFs, and we need to know how this trade looks for us, and perhaps a note of "hey, retail investors, don't bother with this trade, as the ETF probably won't move like the underlying asset in this case". But thank you for your "help".

Hi Derrick, I trade a lot of options on ETF and on futures. His trade works well only on the futures options product he described. The main reason is you need the leverage the futures option gives you that supplies that great asymmetric risk-reward this trade offers. No ETF will do this. However, I did find a good FXE options spread that will and I posted it to get Raoul's option on it. I hope this helps!

Thank you Rob! I may have to find a graceful exit for the IEF calls I entered today...

in ToS go to /ZF then just go to the June option chain and find those strikes.

Very difficult: ZF, ZFMO, OZF: which of those in Interactive Brokers to buy? also never bought a call spread exiting times but confusing

OZF is the right one

Why would OZF be better than ZF? ZF are futures and OZF options on futures? different returns?

Didier, the way I understand it in case of futures you buy it outright hence bigger risk while options on futures provide limited risk to downside (you an only lose premium you paid) but similar upside

Thanks Ivan.

Apart from the EUR, I believe Raoul (not stating on his behalf) is short the AUD as well - as mentioned in his Apr GMI piece. Julian is taking a diametrically opposite view i.e. of reflation hence he is AUD long. Both their plays are vis-a-vis USD. A EUR/AUD short may not offer a favourable risk reward. Given that if there is USD strength/weakness it will be across the board, better to play against USD (long or short - take your pick).

yes, it costed $47 for one in my paper trading account.

Thanks.

Right?? Can someone explain how this works? I see the same low cost in my IB paper account. At the moment the dollar values are reflecting low (-39 mkt value for the 1 short on the 127.5) and (+86 for the 1 long on the 126.50) yet the multiplier are stated as 1000 in the option info tab. I'm a bit confused on how this option is working, or how the info is presented via IB. Reviewing the CME groups website for clarity but I still don't get it how the the market value of each options is reading so low.

Yesterday i called IB and got good help. Will call them again this morning for further help.

I bought June because that was the only month with active options I could find.

Michael: is that your trade for 25 contracts I see on the tape?

No, I didn't buy that many! But it really is a pretty high return like Raoul said.

Michael, I appreciate everyone has different risk tolerance, but is 25 contracts really a lot? Isn’t it just a couple of thousands dollars of premium? Or am I missing something?

Also looking for a way to trade the 5 year bonds via Think or Swim or E-Trade. Thanks

I use Thinkorswim. You should be able to pull up /ZF in your trade drop down. If not, you might have to apply to TD for ability to trade futures first.

for think or swim, does this look right? I have not done one on here... thank you so much BUY +1 /ZFM20:XCBT @126'160 LMT

Economic Cycle Research Institute (ECRI)- had to look it up myself ;)

yes.but I am having a hard time finding its exact definition from the ECRI website.

You'll need to look a bit harder. ECRI LEI, its free on their website under 'indexes'. The website 'capital spectator' also does analysis on the historical series.

Short EUR/USD Futures. Ticker ECM0

If you're not experienced with derivatives, you could buy UUP.

Or EUO etf which -2X short EUR/USD

UUP call options with 28 strike for January 15th 2021 priced at 0.74. Enough time to have a good move.

Thanks everyone! what's your position in ECM? @Steve?

You could buy puts on FXE too. Not sure what you mean by ECM, is that the internet commerce index?

I think this would probably work too, am I wrong? https://www.wisdomtree.eu/en-gb/products/short-leveraged-etps/currencies/wisdomtree-long-usd-short-eur-5x-daily

A word to the wise on using ETFs and options on ETFs, first make sure you understand exactly how the ETF is structured and will behave based on the position and movement you want to take. Take a look at how the retail investors sloughed millions into USO or some of the leveraged ETFs and when a particular movement happened they didn't get "action" they expected. The same applies to option liquidity. You could find yourself with a seemingly wining position you cannot sell out of (or without a lot of slippage) and would have to actually exercise to collect your benefit possibly requiring tying up lots of capital. If I can find some useful "retail" pathways for the trade, will come back and share.

2nd this one. Have made a killing on gold miners this week, but I'm nervous since I agree with this thesis.

I third that one. Please.....

Perhaps transiently, but in an insolvency 'crisis' gold is likely to regain its safe-haven bid quickly imho

I think you mean the real _yield_ is +5.3% ? I must confess, I too was confused with the use of rate and interest rate in the article when discussing the treasury notes.

He means market rates drop to -5% but official rates cannot follow and remain much higher than this deeply negative rate, thus leaving a very tight relative official interest rate.

Sorry, 5 year coupon rate is 1%. Still, any good calculator for this?

I found this from twitter. Don't remember who posted this. Anyways, it might be helpful. 5Y Yield - ZF Price 0.66% - 124.0 0.56% - 124.5 0.47% - 125.0 0.37% - 125.5 0.28% - 126.0 0.19% - 126.5 0.10% - 127.0 0.00% - 127.5 -0.09% - 128.0 -0.18% - 128.5 -0.27% - 129.0 10Y Yield ZN Price 0.65% 139 0.54% 140 0.44% 141 0.33% 142 0.22% 143 0.12% 144 0.01% 145 -0.09% 146 -0.19% 147

So I cheated (used a bloomberg terminal) but I can tell you that the current futures price is a yield of about 34bps. 126.50 strike is about 21bps away - so still positive. The 127.5 is about 41 bps lower, so a negative yield.

Thank you Harry and Hugh for the (ad hoc) confirmation. I guess I will have to invest in a bloomberg terminal should I make sufficient proceeds in this trade!

My dollar book is trading positions, much like MI/GMI and includes bonds, commodities, FX, equities etc

Options on futures

I think that is way to near dated to capture that size of move, most likely

This looks like the calendar spread. So this is NOT what Raoul was suggesting. He was suggesting buying a 126.5 June call on the 5y US Note contract (ZF on IB) and selling the 127.5 call to reduce the total cost. Hope that clarifies.

Hi Harry, thanks. Yeh i realised it was wrong pretty fast but there's no delete comment feature.

Agree, particularly avoiding pitfalls when leveraging up on margin trades.

At least the month and expiration dates of the call spread. I can figure out the rest.

Its a futures call spread. The risk is limited to the initial options cost. The upside is limited to the profit potential if both options go into the money. So the difference between 126.50 and 127.50. x tick value x number of contracts.

Ok. See the answer below.

Thats exactly what I did. Im not sure how to do it otherwise.

A long option position on the ETF would be similar - I suggest an intermediate UST etf like BIV, but one with options

Im surprised you can find the 126'24 but not the 126'16. The latter would be the same as 126.5

I am planning doing the one with the last trading day in June.

Nevermind - this was already answered below - Thanks Raoul. On a different note, is Raoul thinking this hope phase deteriorates in the next 29 Days.

If you can't trade currency in your account you could try selling the Euro by selling FXE etf. There might be other options, that was just one I found. I bought some puts on this etf, which limits downside but also then you have time working against you.

I was looking at IEI (3-7 year notes) but the option volume is too thin. IEF has better volume but with notes in the 7-10 year range it is a bit outside Raoul's trade recommendation. I do wonder what the best time frame would be: June or September? I will probably make both trades.

In regards to IEF, I think Raoul's already long on the 10 yr.

that is 4.5/64ths its all a bit antiquated!

I found something here (https://www.cmegroup.com/education/courses/introduction-to-treasuries/calculating-us-treasury-pricing.html). I believe we want a limit price of 0'020 if that is in 32nds, or 0'040 if that is in 64ths. Don't know

Thanks Raoul!

I notice many folks posting a call of 125.5. That is not what Raoul wrote. The leg you buy is 126.5, and sell 127.5. I managed to execute the spread just now at 0'03!

Thanks for your clarification. Got it now.

Hey Raoul, did you work out the 127.5 strike to sell as it corresponds the futures price with the Cheapest-to-deliver bond priced at 0% yield? I'm trying to work through the pricing using DLV on bloomberg and I got roughly that (127.47), but want to make sure I'm understanding the ctd/futures/yield conversion properly and not just blind squirreling it. Appreciate your all your time and effort!

Hope so! Would love to pick up some cheap BTC -- also, on this Monday GBTC halved their lockup from 1 year to 6 months so we should start seeing some delivery soon (and sales). Hoping premiums go way down (with the price) and can snipe some mega cheap, ultra low (or negative) premium for the IRA

If the margin calls come in and people need to liquidate to cover..... so we need to understand if the 'calls' will be made...

Last time I think it was some hedge funds and family offices who dumped the price down. Would like to know how much the same actions we might see from them this time.

You can buy options on the futures in IB. Symbol is ZF

Brad F. You are a gem <3

Could either of you just clarify what the trades are on IB, I see a ZF Jun01'20 120.75 Call @4385 - is that the correct one? I can't see other side

Just to cheap the bet.

Thank you for your response

Of course!

Raoul, the puts for June 2020 127.5 are not active. There's no volume and trade indicated on Globex. Am I missing something?

Kui. Calls not Puts

Yew L. Thanks I misread the thread and pdf. Got it now.

Well, actually 15x return only achievable via ZFM0

ZFMO is the pure futures. Future options is OZF

Steven, thanks for the clarification. OZF is the right one.