Trading the Fed’s Defined Range Simplified

Instructions for cost average range trading

1) Click here for Bloomberg cash quotes, set the time window to 5Y in the upper right.

2) Each 0.01 change in rate = $41.67 change in contract value.

3) Click here and open the cost average risk/reward spreadsheet, then enable it.
Enter any rate in cell B-2 the net profit or loss shows in cell D-2

4) Click here to enlarge the rate contract valuation chart below

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5) Click here for what the Fed funds rate is and how it’s set

6) Click here  if you haven’t opened the cost average range trade risk/reward spreadsheet when open enable it.

7) The initial position shows in cell E-15  short at 99.90 representing a rate of 0.10% contract value = $416.67,To convert the contract price into the rate it represents take 100.00 – the contract price = the rate, Each 0.01 change in rate = $41.67 change in contract value.8) The initial position size is shown in cell E-16, 50 contracts
9) B-2 current rate, C-2 initial investment, D-2 net loss if the Fed funds rate goes to zero,  E-2 net liquidating value at zero.

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10) The way these trades are structured not only are we prepared for a move to zero but will put the move to zero to work directly for us by adding positions all the way down to zero to cost average our overall entry price to a more favorable rate and price.

11) Enter an additional 50 contracts in cell E-18E-20, E-22, E-24 will automatically with 50 contracts each. The average entry rate of 0.05% will show in cell G-19, average contract entry price 99.9500 shows in cell G-20 and the total number of contracts 250 shows in cell G-21.
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12) Adding positions down to zero (shown in cell B-2) would generate a net loss of -$62,500 shown in cell D-2 and a liquidation value of $37,500 shown in cell E-2.

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Upside

13) Enter 0.10 in cell B-2 representing a rate equal to our initial entry of 0.10%, a net profit of $41,667 will shown in cell D-2 with a net liquidation value of $141,667 shown in cell E-2.
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14) Enter 0.25 in cell B-2 representing the top end of the Feds current target range, a net profit of $197,917 will shown in cell D-2 with a net liquidation value of $297,917 shown in cell E-2.

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15) This is a very simple strategy with the hardest part is choosing what delivery month to trade that has the most time, highest return on risk and liquidity.
16) My team does return on risk analysis for every delivery month in Fed funds out to December 2017 and December 2024 in the 3 month rate contract. The summaries of our analysis are available to our clients at any time.

17) Clients can trade any instrument duration from 30 days to 30 years using whatever leverage (if any) they’re comfortable with. Once the guidelines are established my team can objectively  enter and monitor all positions for any instrument traded on the C.M.E , Eurex or  Euronext .18) Positions and balance are available online at anytime

19) Accounts can be funded and maintained in any major currency20) Liquidity in portion or all in any currency is 2-48 hours21) Our compensation is based on 10% of net new high profits quarterly
If you have any questions or would like me to walk you this call or email with a date, time and contact number.
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RISK DISCLOSURE STATEMENT

PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. EXAMPLES OF HISTORIC PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR ARE LIKELY TO OCCUR.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT.

IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADE PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF THE HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

BID/ASK SPREADS, BROKERAGE COMMISSION, CLEARING, EXCHANGE AND REGULATORY FEES WILL HAVE AN ADVERSE IMPACT ON THE NET OVERALL PERFORMANCE OF YOUR ACCOUNT. PRIOR TO MAKING A DECISION TO PARTICIPATE IN ANY INVESTMENT MAKE SURE YOU FULLY UNDERSTAND THE FEES ASSOCIATED WITH TRADING.

THE INFORMATION PROVIDED IN THIS REPORT CONTAINS RESEARCH, MARKET COMMENTARY AND TRADE RECOMMENDATIONS. YOU MAY BE SOLICITED FOR AN ACCOUNT BY ONE OF OUR REPRESENTATIVES OR EMPLOYEES. IT SHOULD BE KNOWN THAT THE REPRESENTATIVES OF OUR FIRM MAY TRADE FUTURES AND OPTIONS FOR THEIR OWN ACCOUNTS OR THOSE OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS MARGIN REQUIREMENTS, RISK FACTORS, TRADING OBJECTIVES, TRADING INSTRUCTIONS, TRADING STRATEGIES, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE LIQUIDATION OR INITIATION OF FUTURES OR OPTIONS POSITIONS THAT DIFFER FROM THE OPINIONS AND RECOMMENDATIONS FOUND IN THIS REPORT.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES

Published by

Asset Investment Management

Family Office, Advisors

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