Swing trading the ES for the bigger moves has been working okay (at least better than the tiny scalps for a net loss after commissions I had last time I posted). I was able to ride 3 contracts from 1250-1279, sell two of them, and then buy them back a little under 1265, so right now sitting on 3 long ES again.
I want to add short ZB to the mix but not quite sure how to do it. I want to be short ZB, but if I am short ZB and long ES then I am afraid I might be getting too big and setting myself up for big swings in the P/L. If stocks and bonds offset each other then it would be best to be either long/long or short/short - but I have no interest in ever being long ZB at these levels. That being the case, it seems that I need to wait until I want to go short ES to short ZB, which probably won't be until ES gets to 1300 or so (if that happens) - but if that happens I presume ZB will be a good deal lower than it is now. Any thoughts?
Over the long run those two work in opposite directions, but short term they can do anything. But I basically picked ZB over ES rather than try to play both. I have done the short ES/ZB trade for a day or so when they are both going up.
ReplyDeleteAre you short ZB now or waiting for a higher price?
ReplyDeleteI do not have a current position. I've been inactive the last two weeks other than was short an iron condor that was closed out this morning. I'm currently nowhere on bonds and not sure what my next move is. I am the same as you in not wanting to be long up here, but not sure where I want to get short yet either.
ReplyDeleteI'm putting in an order to short 1 ZB at 143'05. If it doesn't fill overnight I'll probably get in at some level tomorrow as I do not want to miss the trade. Will probably sell 1 or 2 ES to try to control the risk a bit.
ReplyDeleteFilled my ZB overnight so I am now an officially a bond trader. Just closed out all the long ES positions around 1269 so will wait for good opportunity to go short ES now.
ReplyDeleteCool!
ReplyDeleteSwing trading ES/Bonds is a level of trading me and my account size aspire to... Let me clarify, making money while only swing trading and options. Now I am mostly comfortable/profitable with day trading. I'll be sure to follow your posts regrading your swing trades.
- Trin
Obviously I'm not an expert but if you follow my posts at least there is a chance you won't make the same mistakes I will make.
ReplyDeleteOne thing I have figured out quickly is that position size is critical - for the way I trade keeping about 25K in cash or very liquid assets for each ES or ZB contract allows me to trade without stop orders and hold positions for several days at a time without really thinking about it much.
At the moment just short 1 ZB with a limit order to short 1 ES at 1280.
Didn't fill on the short ES for 1280 overnight so took it off - too bad because it would have filled after jobs report and could have had a quick 6 points.
ReplyDeleteSold another ZB just now for 143'06. Would like to have a few of these to provide the opportunity to swing trade a little as well as always keep one for the longer term.
I put an order in to short ZB at 143'02 late in the day and wasn't filled, we closed at 143'01. I'll take a look on Sunday night when we open and see what's going on then.
ReplyDeleteI sold 1 more at 143'07, so total position is short 3 ZB at 143'06. That is pretty close to max for me, will just look for trading opportunities for 1 of these contracts now.
ReplyDeleteInteresting article:
ReplyDeletehttp://www.channelnewsasia.com/stories/afp_world_business/view/1175707/1/.html
I suppose if US bonds go to negative rates that will not be too good for my position. Sold 2 more ZB today so position is now short 5 ZB for 143'12
Trade Update:
ReplyDeleteBought to close 2 ZB this evening for 142'19. That worked out for a nice gain for the day - will now just wait for another good opportunity to sell them.
Nice gain, I was going to ask what your desired exit point was now that you had 5. I didn't get filled earlier today but if I did I would have covered for almost a point as well. There is a 30-yr bond auction on Thursday and the last few have seen ZB get pretty volatile. If its a bad auction and prices spike I will take that as an entry point for a short.
ReplyDeleteThanks - I got a little lucky today and sold 2 at the high of 143'23, so I figured that since I could close them out for more than 1 point profit I should just take it. I didn't know about the bond auction coming up, but I am going on the assumption that the market is going to correct a bit and we may get the opportunity to sell ZB again at higher prices, so I'm putting in an order to close 1 more for 142'17 overnight.
ReplyDeleteDid you read that story about the German bond auction? I'm wondering if we can take anything from that. If people are willing to accept negative returns from German bonds, it may be reasonable to expect that there will be high demand for US bonds which I presume would increase the price of ZB.
ReplyDeleteJust one question to make sure I understand this correctly since I am still relatively new to bond trading. You said if it's a bad auction and prices spike that would be an entry for a short.
ReplyDeleteMy understanding is that "bad auction" means that the government has a hard time selling bonds - and in that case they have to sell the bonds cheaper and at higher interest rates as the Greeks and Italians have had to do. In that case it would be a good time to cover but not a good time to enter the short. Is that right?
Closed ZB at 142'17, 142'14 and 142'11 overnight so now I'm flat.
ReplyDeleteSandeep, sorry about the confusion. You are correct on the good/bad bond auction. I was speaking from the perspective of someone who has been shorting bonds for a year. So to me a bad auction is when the government has a "good" auction.
ReplyDeleteAs far as the article on German bonds, I guess personally its concerning because it means people are willing to lock in a guaranteed loss in exchange for return of most of their principle. That doesn't sound like investing to me, it sounds like people scared out of their mind. It doesn't mean there will be a meltdown in the Eurozone but clearly anybody trying to lock in a loss for the next six months is pretty worried.
It does kind of bring back memories of Fannie Mae $25 preferreds selling for $15 and Bear Stearns declining by over 50% well before any public bad information had actually been confirmed. Is it just dumb people placing bad bets or smart people making sure they remain solvent, or somewhere in between. Who knows. That's why I'm sticking to only one contract at a time right now as we are already way past any worse case scenario I would have ever envisioned. The ES at near 1300 and bonds at 143 for an extended period is unchartered territory.
I shorted ZB today at 143 and sold the 142 put for a full point. If I can pick up 2 full points on this trade in 2.5 weeks I'm happy. If I'm short at a cost average of 144 I'm also happy with that. It's possible I will swing trade a second contract but for now my comfort zone is one.
ReplyDeleteMaybe a little impatient again on the entry, could have just got short today at 144 instead of a cost average of 144 at expiration. I hadn't made a trade since the Friday before Xmas so was just a bit antsy. In my year following ZB there has never, seriously, never been a gap that wasn't filled. And we have a gap near 144'16 from last week after the 3-day weekend that is still there.
ReplyDeleteI wish TD had options on futures available. I started a new position today, short 2 at an average of 143'20.
ReplyDeleteI was upset when they got rid of them. Weeklies on ZB were great. I would have much rather used that than the 2.5 week expiration. I supposed we could use weeklies on TBT or TLT as an alternative, but you're not getting a direct correlation and you're tying up more capital than if you used a derivative of the underlying.
ReplyDeleteI asked TD about options on futures today. The guy said they should offer them by April.
ReplyDeleteJust got flat again at 143'18. I'm thinking for the next trade may try selling ES/ZB at the same time, this seems like a pretty good level to sell both of them.
ReplyDeleteSurprised to see this story - I was expecting a strong auction. Anyway, got back in this morning,
ReplyDeleteShort 1 ZB for 144'02
http://www.thestreet.com/story/11374967/1/weak-demand-at-auction-of-30-year-treasury-bonds.html
Added to my position at the end of the day with a little twist to try pairs trading, went with short ZB/short NQ with a 1:2 ratio like Tom does. So this position is:
ReplyDeleteShort 2 ZB 142'21 (approx.)
Short 4 NQ 2378.625
Should be an interesting experience. Still have the 1 short ZB at 144'02 that I am keeping separate from this trade.
Did you mean 143'21?
ReplyDeleteYes, you are correct. Sold 1 for 143'21 and 1 for 143'22.
ReplyDeleteSee NQ up a bit more so did it 1 more time - this time did:
ReplyDeleteShort 1 ZB 143'22
Short 2 NQ 2381
This morning at the moment the ZB/2NQ pairs trade shows a gain of $50 for the NQ's and a loss of about $1550 on the ZB's. Plan now will be to just wait till I am right.
ReplyDeleteClosed the 6 short NQ at 2355. That works out for a nice profit on the NQ but obviously ZB's showing a nice loss at the moment. Sold more ZB's though, now short a bunch of them at an average of 144'15.
ReplyDeleteInteresting day, on vacation so ended up doing the majority of my trading from my iPhone while at Disney, which worked better than I thought it would. Closed out my /ZB position at 144'08 so that worked out for a nice profit. Sold /NQ at various points during the day, so now I'm short a bunch of /NQ at an average of about 2409.
ReplyDeleteI took my short ZB, short 142 put trade down today. With only three days left until expiration and one full point ITM this option still had almost $500 in premium in it. I only got $1000 for the option when it was a full point OTM two weeks ago.
ReplyDeleteSo I made two mistakes on this trade, the first is my entry was too soon and I'm not saying that in retrospect. I tried to justify it by selling the put and increasing the cost basis of my short. That was just pure impatience on my part. The second mistake is that I didn't consult the economic calendar before I put the trade on. If I was going to get short an option that expires three days after the FED announcement then I should have been prepared to close it out before the announcement, so that's what I did today.
I'm happy to pick up a net of $1383 for 14 days of risk exposure, but not happy that I made mistakes. I might be leaving an easy $500 on the table for the next 75 hours but given the five day straight drop in the underlying, a FED announcement tomorrow, and accepting that I made some mistakes, I feel good to close this out and move on. I'm almost 100% cash right now, I have two small trades on for a total of $2500 in BP. So I'm looking for new trades at the moment.
I'm still short NQ at 2409, obviously that trade is going poorly. Hated to do it but hedged part of that position by going long /ES at 1315 this evening to protect myself in case the market keeps going up.
ReplyDeleteI had an order in today to short at 145'06 but missed by 3 ticks.
ReplyDeleteI got short at 144'08 and will only add a second unit if we take out new highs, so between 146-147. Otherwise I'm looking to cover at 142ish.
ReplyDeleteLack of patience once again. I missed my entry yesterday at 145'06 by 3 ticks and rather than be patient I entered later in the day at 144'08. So twelve hours later I could have had my desired entry. These are mistakes I shouldn't be making at this stage so frustrating.
ReplyDelete