Interest Rate Options
Trading
By: www.ProfitableTradingTips.com
The most profitable trading
commonly occurs during times of
great volatility. Right now interest
rates are volatile. Yield...
This could be within a month. The
Fed’s quantitative easing program
is the monthly purchase of $85
Billion in US Treasurie...
The result has been a resurgence of
American industry and housing
market. Unemployment is down as
well. The Fed expects to...
The result of the Fed making this
announcement has been a
wholesale selloff of bonds. Bond
buyers expect to see interest r...
If you buy a bond that pays one
percent interest and rates rise to
three percent you have a bond that
you need to hold to ...
Traders can profit in this
environment by trading bonds or
via interest rate options trading.
Fundamental analysis of the
...
And technical analysis of the
market itself may be more useful to
the extent that the market is
spooked.
By: http://profit...
The Scoop on Interest Rate
Options Trading
By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate-
opt...
On the Chicago Board Options
Exchange you can trade European
style cash settled options on US
Treasury yields. Trading has...
Rates traded include those for
short middle or long term
treasuries. A call contract gives the
buyer payment if rates go u...
CBOE Interest Rate Options
Trading Symbols
By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate-
opt...
Thirteen Week Treasury: IRX
Five Year Treasury: FVX
Ten Year Treasury: TNX
Thirty Year Bond: TYX
By: http://profitabletrad...
Expiration dates for interest rate
option trading are the Saturday
following the third Friday of the
expiration month.
By:...
Interest Rate Options Trading
Today
By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate-
options-tr...
Traders believe that the Fed will go
ahead and cut back on its
quantitative easing program. This
would drive up interest r...
Thus many are buying calls. Bond
holders are selling in order to get
out of low interest rate bearing
bonds before interes...
Thus a smart trader could make
money by purchasing puts at the
right time. An old strategy that
often works is called a lo...
He wins if the interest rate goes
either way. His risk is limited to
the price of the two contracts.
Profitable day tradin...
Following the News
By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate-
options-trading
One means of how to profit from
online trading is to simply be
present at the trade station during
the trading day.
By: ht...
The business of trading the news is
one of the most profitable day
trading strategies and probably the
most profitable whe...
Investors typically believe that the
values of equities are set by the
fundamentals. However, in reality,
equity value is ...
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Interest Rate Options Trading

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Published on

http://profitabletradingtips.com/profitable-trading-tips/interest-rate-options-trading

Interest Rate Options Trading

The most profitable trading commonly occurs during times of great volatility. Right now interest rates are volatile. Yields are rising as traders expect the Federal Reserve to cut back on its quantitative easing program. This could be within a month. The Fed’s quantitative easing program is the monthly purchase of $85 Billion in US Treasuries. This program has driven interest rates down and kept them there. The result has been a resurgence of American industry and housing market. Unemployment is down as well. The Fed expects to reduce this program gradually as the need diminishes. The result of the Fed making this announcement has been a wholesale selloff of bonds. Bond buyers expect to see interest rates rise and do not want to be caught with low interest rate bonds. If you buy a bond that pays one percent interest and rates rise to three percent you have a bond that you need to hold to maturity or sell at a loss. Traders can profit in this environment by trading bonds or via interest rate options trading. Fundamental analysis of the economy in an attempt to predict Fed action will be useful in this regard. And technical analysis of the market itself may be more useful to the extent that the market is spooked.

The Scoop on Interest Rate Options Trading

On the Chicago Board Options Exchange you can trade European style cash settled options on US Treasury yields. Trading has to do with projected interest rates. Rates traded include those for short middle or long term treasuries. A call contract gives the buyer payment if rates go up and a put gives the trader payment if rates fall.

CBOE Interest Rate Options Trading Symbols

Thirteen Week Treasury: IRX
Five Year Treasury: FVX
Ten Year Treasury: TNX
Thirty Year Bond: TYX

Expiration dates for interest rate option trading are the Saturday following the third Friday of the expiration month.

Interest Rate Options Trading Today

Traders believe that the Fed will go ahead and cut back on its quantitative easing program. This would drive up interest rates. Thus many are buying calls. Bond holders are selling in order to get out of low interest rate bearing bonds before interest rates jump up. As with all trading scenarios, the market may overshoot. Thus a smart trader could make money by purchasing puts at the right time. An old strategy that often works is called a long straddle. In this case the trader buys both a put and a call. He wins if the interest rate goes either way. His risk is limited to the price of the two contracts. Profitable day trading strategies might be to buy and sell options contracts as the market waffles back and forth in anticipation of Fed action and the market’s response.

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Interest Rate Options Trading

  1. 1. Interest Rate Options Trading By: www.ProfitableTradingTips.com
  2. 2. The most profitable trading commonly occurs during times of great volatility. Right now interest rates are volatile. Yields are rising as traders expect the Federal Reserve to cut back on its quantitative easing program. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  3. 3. This could be within a month. The Fed’s quantitative easing program is the monthly purchase of $85 Billion in US Treasuries. This program has driven interest rates down and kept them there. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  4. 4. The result has been a resurgence of American industry and housing market. Unemployment is down as well. The Fed expects to reduce this program gradually as the need diminishes. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  5. 5. The result of the Fed making this announcement has been a wholesale selloff of bonds. Bond buyers expect to see interest rates rise and do not want to be caught with low interest rate bonds. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  6. 6. If you buy a bond that pays one percent interest and rates rise to three percent you have a bond that you need to hold to maturity or sell at a loss. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  7. 7. Traders can profit in this environment by trading bonds or via interest rate options trading. Fundamental analysis of the economy in an attempt to predict Fed action will be useful in this regard. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  8. 8. And technical analysis of the market itself may be more useful to the extent that the market is spooked. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  9. 9. The Scoop on Interest Rate Options Trading By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  10. 10. On the Chicago Board Options Exchange you can trade European style cash settled options on US Treasury yields. Trading has to do with projected interest rates. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  11. 11. Rates traded include those for short middle or long term treasuries. A call contract gives the buyer payment if rates go up and a put gives the trader payment if rates fall. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  12. 12. CBOE Interest Rate Options Trading Symbols By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  13. 13. Thirteen Week Treasury: IRX Five Year Treasury: FVX Ten Year Treasury: TNX Thirty Year Bond: TYX By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  14. 14. Expiration dates for interest rate option trading are the Saturday following the third Friday of the expiration month. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  15. 15. Interest Rate Options Trading Today By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  16. 16. Traders believe that the Fed will go ahead and cut back on its quantitative easing program. This would drive up interest rates. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  17. 17. Thus many are buying calls. Bond holders are selling in order to get out of low interest rate bearing bonds before interest rates jump up. As with all trading scenarios, the market may overshoot. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  18. 18. Thus a smart trader could make money by purchasing puts at the right time. An old strategy that often works is called a long straddle. In this case the trader buys both a put and a call. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  19. 19. He wins if the interest rate goes either way. His risk is limited to the price of the two contracts. Profitable day trading strategies might be to buy and sell options contracts as the market waffles back and forth in anticipation of Fed action and the market’s response. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  20. 20. Following the News By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  21. 21. One means of how to profit from online trading is to simply be present at the trade station during the trading day. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  22. 22. The business of trading the news is one of the most profitable day trading strategies and probably the most profitable when professionally combined with other strategies in a trader’s skillset. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
  23. 23. Investors typically believe that the values of equities are set by the fundamentals. However, in reality, equity value is set by the perception of the future value of fundamentals. This applies to bonds and interest rates in the current situation. Watch news and trade the reaction. This can be a profitable approach to interest rate options trading. By: http://profitabletradingtips.com/profitable-trading-tips/interest-rate- options-trading
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