Trading Interest Rates Higher

Full Fed press conference video (52:19) & Opening Statement (PDF)
Next Fed Meeting 31 July – 1 August 2018

Latest Fed expectations for hikes through December 2020 (2:30)

Educational Links US Rate Analysis Euro Rate Analysis

2) Fed’s expectations and contract valuations

0.12% contract value = $500.00 (November 2015)
1.97% contract value = $8,208.33 (13 June 2018)
2.40% December 2018 = $10,000.00
3.10% December 2019 = $12,916.67
3.40% December 2020 = $14,166.67
Each 0.01 = $41.67

3) Fed Funds 1954 – 2018 chart Data & Contract Valuation (excel)

Four trades capturing the move higher in rates contact me or others.

4) Trading Fed Funds Futures

4.1) ZQZ18 Quote
4.2) 2 Year chart (daily data)
4.3) Quotes all deliveries
4.4) About Fed Funds Futures
4.5) What the Fed Funds Rate is and How it’s set
4.6) Interest Rate Educational Videos and Links
4.7) Today’s probability for a rate hike at the next Fed meeting
4.8) US Economic Reality 2000-2018

5) Fed Funds, on this trade what we’re banking in is Fed chair Powell is right about the rate the Fed sets and rates will eventually rise to 3.40%.

Entry = 0.8350%, position value $3,479.17
Fed Objective 3.4000%, position value $14,166.65

5.1) Trade entry short ZQZ18 99.1650 (3 October 2016)
Rate the contract price represents 100.0000 – 99.1650 = 0.8350%
Contract value = 0.8350 X $4,166.67 = $3,479.17

5.2) At Fed’s Objective 3.40%
Contract price 100.0000 – 3.4000 = 96.6000
Contract value = 3.4000 X $4,166.67 = $14,166.65
Gain if the Fed is correct = +$10,687.48
This position will need to be rolled December 2018

Current chart updated every 5 minutes, each 0.01 = $41.67

6) Trading 3 month deposits outside the Treasury System (eurodollars)

6.1) Quotes all deliveries
6.2) About Eurodollar Interest Rate Futures
6.3) Video the basics of trading Eurodollar interest rate spreads
6.4) Interest Rate Educational Videos and Links
6.5) Today’s probability for a rate hike at the next Fed meeting
6.6) US Economic Reality 2000-2018

7) GEU18-GEZ20 on this trade we’re banking on the market will eventually price in the Fed’s disclosed rate hikes between September 2018 and December 2020 of 1.40%

Entry = 0.3900, position value $3,900
Fed’s Objective 1.40, position value $14,000

7.1) Entry the 29th of May 2018
Long 4 December 2018 GEU18 97.6350
Short 4 December 2020 GEZ20 – 97.2450
IntraMarket Spread GEZ18 97.6350 – GEZ20 97.2450 = 0.39
Market’s expected rate hike between Sep. 2018 & Dec. 2020 = 0.39%
Entry position value = 0.3900 X $10,000.00 = $3,900.00

7.2) Our Objective is the Fed’s Target
Fed’s expected rate hikes by December 2020 = 1.40
Position value at the Fed’s target, 1.40 X $10,000.00 = $14,000.00
(The nearby delivery will have to be “rolled” quarterly)
7 year spread chart GEU18 – GEZ20

Intraday GEU18 -GEZ20 chart updated every 5 minutes each 0.01 = $100.00

Strategy: I’m using split objectives on this trade, 1/2 of the position (2 contracts) in at 0.40 or better out at 0.55 to 0.75. 1/2 (2 contracts) trading long-term from 0.3150 to the objective of 1.40 or until we have to roll the GEU18 or the major trend reverses.

8) GEZ18-GEZ20 on this trade we’re banking on the market will eventually price in the Fed’s disclosed rate hikes between December 2018 and December 2020 of 1.00%

Entry = 0.3150, position value $3,150
Fed’s Objective 1.00, position value $10,000

8.1) Trade entry the 29th of May 2018
Long 4 December 2018 GEZ18 97.4200
Short 4 December 2020 GEZ20 – 97.1050
IntraMarket Spread GEZ18 97.42 – GEZ20 97.1050 = 0.3150
Market’s expected rate hike between Dec. 2018 & Dec. 2020 = 0.3150%”
Position value 0.3150 X $10,000.00 = $3,150.00
Spread chart GEZ18 – GEZ20 in at 0.3150 expecting the price to increase
Complete report on this trade

8.2) Minimum Objective 0.65
Position value at 0.3150 entry = $3,150.00
Position value at the minimum objective of 0.65 = $6,500
Gain = $3,350 (106.34%)
Spread chart GEZ18 – GEZ20

8.3) At the Fed’s 1.00 target
Position value at 0.3150 entry = $3,150.00
Position value at the Fed’s target of 1.00 = $10,000.00
Gain = $6,850.00 (217.45%)
Spread chart GEZ18 – GEZ20

Current chart updated every 5 minutes, each 0.01 = $100.00

Strategy: I’m using split objectives on this trade, 1/2 of the position (2 contracts) in at 0.40 or better out at 0.55 to 0.65. 1/2 (2 contracts) trading long-term from 0.3150 to the objective of 1.10 or until we have to roll the GEZ18 or the major trend reverses.

9) GEU18-GEZ23 on this trade we’re banking on the market will eventually price in rate hikes between September 2018 and December 2023 of 2.1000%

Entry = 0.5750, position value $5,750
Fed’s Objective 2.1000, position value $21,000

9.1) Trade entry the 31th of May 2018
Long 4 September 2018 GEU18 97.5650
Short 4 December 2023 GEZ23 – 96.9950
Intramarket Spread GEU18 (97.5650) – GEZ23 (96.9950) =0.5750%
Market’s expected rate hike between Sep. 2018 & Dec. 2023 = 0.5750%
Position value 0.5750 X $10,000.00 = $5,750.00
Spread chart GEU18 – GEZ23 in at 0.5750 expecting the price to increase

9.2) Minimum Objective 1.00
Position value at 0.5750 entry =$5,750.00
Position value at the minimum objective of 1.00 = $10,000.00
Gain = $4,250.00 (73.91%)
Spread chart GEZ18 – GEZ23

9.3) Our Long Term Objective 2.10
Position value at 0.5750 entry = $5,750.00
Position value at the objective 2.10 = $21,000.00
Gain = $15,250.00 (265.21%)
Spread chart GEZ18 – GEZ23

Current chart updated every 30 minutes, each 0.01 = $100.00

Strategy: I’m using split objectives on this trade, 1/2 of the position (2 contracts) in at 0.60 or better out at 0.75 to 0.90. 1/2 (2 contracts) trading long-term from 0.5750 to the objective of 2.10 or until we have to roll the GEU18 or the major trend reverses.

10) If you’d like to track additional positions send me message

Other interest rates traded
10.1) US Rates
10.2) European Rates
10.3) Australian Rates

11) Rate Reports

11.1) Trading 3 Month Rates Higher & Fed Expectations 24 September 2015
11.2) Countdown To Higher U.S. Interest Rates 9 October 2015
11.3) Market Versus Fed For Rates 16 September 2016
11.4) Trading Rates Higher & Fed Expectations 20 January 2017
11.5) Trading Rates Higher & Fed Expectations 13 March 2017
11.6) Trading Rates Higher & Fed Expectations 28 November 2017

12) Original Positions & Updates Published On Seeking Alpha & Here

12.1) Original positions published on Seeking Alpha 5 November 2015
12.2) Update on Seeking Alpha 5 September 2016
12.3) Update Seeking Alpha 13 January 2017
12.4) Trading Rates Higher Using Cost Averaging 24 March 2015
12.5) Trading 3 Month Rates Higher & Fed Expectations 27 April 2015
12.7) Trading Rates Higher & Fed Expectations 9 June 2015
12.8) The Math On Why U.S. Inflation Is “contained” 22 July 2015
12.9) Hedging Treasury Risk 3 August 2015
12.10) Trading the Fed Funds Rate Higher 23 July 2015
12.11) What I See On The Horizon 6 August 2015

13) Fed Funds Risk Reward Spreadsheets

13.1) What the Fed funds rate is and how it’s set
13.2)
3 Month Rates March, June December Fed Funds March hedge

13.3) Fed Funds December 2016
13.4) Fed Funds March 2016 S 99.74 (no hedge)
13.5) Fed Funds December 2016 S 99.46 (no hedge) 100K
13.6) Fed Funds December 2016 S 99.46 (no hedge) 10K
13.7) Trading 3 month rates higher through December 2016
13.8) July 2015 25k no hedge
13.9) July 2015 99.83 25K cost average hedge
13.10) July 2015 99.82 25K 87.50 hedge
13.11) July 2015 10K 99.81/99.75 hedge
13.12) Sep 2015 25k cost average hedge
13.13) Oct 2015 25K cost average hedge
13.14) Dec 2015 25K cost average hedge

14) 3 Month Deposit Spreadsheets

14.1) What the 3 month rate is and it’s history
14.2) 3 Month Dec 2017 S 99.70 (no hedge)

14.2) 3 Month put weighted vol spread Dec 2017
14.3) 3 Month vol spread Dec 2017
14.4) 3 Month vol bear spread no hedge Dec 2017
14.5) 3 Month GEH-M-Z-201616 Fed Funds ZQ-H16 10.05.2015
14.6) Contract specifications
14.7) 3 Month Hedged Cost Average
14.8) 3 Month Rate September 2015 hedge
14.9) 3 Month Rate December 2015 hedge

15) Other Interest markets we trade

15.1) All US interest rate markets we trade
15.2) European interest rates
15.3) Australian Interest rates
15.4) Educational videos and Links

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If you’d like to review this trade, or any of the other programs in our line-up contact me.

Regards,
Peter Knight Advisor
Asset Investment Management

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