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Strategies & Market Trends : Commodities - The Coming Bull Market
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To: Steve Huskey who wrote (1533)4/16/2003 5:46:31 PM
From: Steve Huskey  Read Replies (1) of 1643
 
Here's a couple techniques and markets.

Bonds- Ok I'm playing bonds to go down over the long term because interest rates have nowhere to go but up. Instead of taking a position with stops, I will use a spread. I love the NOB spread. Thats 10-year notes over 30-year bonds. Think about buying a cd at the bank. Payouts for shorter-term cd's are ALWAYS less than for longer term. Similarly, the ten year notes are ALWAYS higher in price than the 30-year notes.
In the recent bond bubble, the spread has gotten very small. Soooooooo, you can use a spread price of zero as a "bottom". Currently the spread is around 2 points. That's $2000. So you can allocate about $3000 to this and hold on for the spread to open up.
This is really nice to scale trade too. That's like "averaging" down, but since we have a floor of zero, fairly safe and really increases profits. For instance... if the spread reaches 1 point I'll take another position and liqudate it at 2 points. Rinse, repeat.

To study the spread go to this site:
britefutures.com

The NOB spread is nice because it eliminates timing. Bonds can make a HUGE move against you and the spread may not change that much. It allows you to hold on and buy more time.

More next post.
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