Trading US Short Term Interest Rates Higher

Send us a message or  schedule an online review  to speak with a broker who’ll  answer questions and provide supporting links for additional information and/or verification.

For beginners see this trade, for more advanced traders see the links below.

1) Tracking these trades and/or experimenting with any potential outcome for them.

1.1) How to use this spreadsheet (5 minutes 41 seconds)

2) Four trades to capture the move higher in rates and the tools to track them.

2.1) Trade #1

Short ZQZ18 (December 2018 Fed Funds Futures) at 99.1650

100.0000   Represents a rate of 0.0000% (100.0000 – price = rate)
-99.1650    Subtract the contract entry price
0.8350%  = Markets anticipated rate for Dec. 2018 delivery at entry

100.0000   Represents a rate of 0.0000% (100.0000 – price = rate)
-97.9000    Price at the lowest anticipated rate by the Fed by Dec 2018
2.1000%   = The lowest anticipated rate by the Fed for December 2018 delivery

We’re short, positioned to capture the move lower in the ZQZ18’s contract price from 99.1650 to 97.9000. This represents an increase in the Fed Funds rate from 0.8350% to 2.1000%, the the lowest of the Federal Reserve’s expectations for this rate by the end of December 2018.

Current Chart & Quotes.  Each 0.01 change in price down = +$41.67 up -$41.67

Screenshot_9
Source Federal Reserve

2.2) Trade #2  spread trade

Long GEZ17   December 2017, 3 month deposits contract specifications
Short GEZ18  December 2018, 3 month deposits contract specifications
Entry price = 0.1050, premium to December 2017

Market’s anticipated rate hikes from Dec. 2017 to Dec. 2018 at entry 0.1050%

Minimum Fed anticipated rate hikes from Dec. 2017 to Dec. 2018 = 0.7000%

We are positioned to capture the move as the spread widens from our entry at 0.1050 to the lowest Fed target of 0.7000 by December 2019.

Current chart & Quotes  Each 0.01 = $25.00

Screenshot_24
Source Federal Reserve

2.3) Trade #3  spread trade

Long GEZ17   December 2017, 3 month deposits contract specifications
Short GEZ19  December 2018, 3 month deposits contract specifications
Entry price = 0.4250, premium to December 2017

Market’s anticipated rate hikes from Dec. 2017 to Dec. 2019 at entry 0.4250%

Minimum Fed anticipated rate hikes from Dec. 2017 to Dec. 2019 = 1.5000%

We are positioned to capture the move as the spread widens from our entry at 0.4250 to the lowest Fed target of 1.5000% by December 2019.

Current chart & Quotes  Each 0.01 = $25.00

Screenshot_32Source Federal Reserve

2.4) Trade #4  spread trade

Long  GEZ17  December 2017, 3 month deposits contract specifications
Short GEZ20  December 2018, 3 month deposits contract specifications
Entry price = 0.4500, premium to December 2017

Market’s anticipated rate hikes from Dec. 2017 to Dec. 2019 at entry 0.4500%

Minimum Fed anticipated rate hikes from Dec. 2017 to Dec. 2020 = 1.5000%

We are positioned to capture the move as the spread widens from our entry at 0.4500 to the lowest Fed target of 1.5000% by December 2020.

Current chart & Quotes  Each 0.01 = $25.00

Screenshot_31
Source Federal Reserve

3) Other US interest rate markets we trade 

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4) European interest markets we trade 

Screenshot_76

5) Lowest of Fed expectations for rate hikes through 2019.  (June 2017)

6) Median Fed expectations for rate hikes through 2019  (December 2014) however the Fed has been wrong on nearly every economic forecast and literally every rate call since 2008. The standard joke is the Fed no longer stands for Federal Reserve but failed economic policy.

7) Fundamentals

7.1) For the Fed site with all press conference videos and statements

7.2) The low end of Fed expectations call for the Fed Funds rate by December 2019 of 2.90%, 2.12% below the 60 year average.

Current Fed graph 1954 through 2017

Screenshot_22Source Federal Reserve

7.3) A few articles I’ve written on rates, inflation and the Fed

7.4) The last tightening cycle

30 June 2004 1.25% contract value $5,208

29 June 2006 5.25% contract value $21,875 

Source Federal Reserve

8) Fee structure and defining overall account risk

9) Open an account for minimums of 10K to 500K USD or major currency equivalent, for account greater than 500K you can work with the majority of the firms listed on this page.

If you’d like to review this and/or other programs/markets please contact us or schedule an online review using this link, we’ll answer all your questions and provide you supporting links for additional information and/or verification.

 

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Disclosure

Review Links

1)Reports

171) Deposit rates relative to BLS.GOV inflation
170) US China Trade War Update
169)
Interpreting the U.S. Bond Rally

168) Trading Rates Higher 201806
167)
Identifying The Trend Change In Gold
166)
US Economic Reality 2000-2018
165) Performance summary
164) Track us trading rates higher through June 2018
163) Platinum Gold Spread
162) SeekingAlpha 20 November 2017 Update
161) Trading rates Higher March 2017
160) SeekingAlpha 15 November 2015 Recommendations
159) Collars and Deltas
158 )Educational videos
157) Segregated Accounts
156) Trading Apple Using Defined Risk Strategy
155) +98.63% trading US short term interest rates higher, 13 March 2017
154) +80.16% Trading Interest Rates Higher, 19 January 2017
153) Common Mistakes System Traders Make
152) The pounding in the Pound is the US dollar next?

151) Capturing The Move Higher In The Fed Funds Rate
150) Trading with Collars
148) Market Versus Fed Expectations For Rates
147) 1933-1939 Versus 2008-2016
146) What is Banqiao Banking Policy? 
145)  US Consumer Price Index Fact or Fiction?
144) Oil: Trend Insights from Futures and Options
143)  Who’s right the Market or the Fed?
142)  Recession slang
141)  The Sad Story of the Hunt Brothers
140)
  The only solution left for US Treasury debt crisis
139) 
Strategy to deal with rising rates over the next 36 months
138)  Last Fed guidance as to where the Fed sees rates and when
137)  FOMC meeting schedule to set US rates
136)  The last tightening cycle 2004-2006 1.00% to 2006 5.25%
135)  What the Fed Funds rate is and its history
134)  Capture the move higher in the Fed Funds rate
133)  What the 3 month rate is and its history
132)  Capture the move higher in 3 month rates
131)  Hedging Treasury Risk
130) Trading the Fed’s defined range in the Fed funds rate
129) The US versus China using the Fed’s numbers
128) How China’s race to reserve currency status will rock markets
127) The Chinese currency to become more important globally
126) China: Renminbi/Yuan becomes an IMF reserve currency
125) Bernanke and the “Great Recession”
124) Why U.S. inflation is so “contained”
123) Trading the S&P 500 using collars
122) Countdown to higher rates
121) CME interest rate contracts
120)
Current interest rate news last 24 hourslast weeklast month

Risk Reward Spreadsheets

108) Gold Collar Spreadsheet
109) EUR Collar Spreadsheet
110) SP 500 Collar Spreadsheet
111)
Option Write Spreadsheets
110) Capturing the move higher in rates Short Dec 2016 – 99.46

109) Trading the Fed Funds rate
108) Fed Funds Outright (no hedge)
107) Fed Funds (no hedge) 100K
106) Fed Funds  (no hedge) 10K
105) Trading 3 month rates higher
104) 3 Month  (no hedge)
103) 3 Month put weighted vol spread
102) 3 Month vol spread Dec 2017
101) 3 Month vol bear spread no hedge Dec 2017
100) 3 Month GEH-M-Z-2016 Fed Funds ZQ-H 2016 10.05.2015

Fed Charts & Supporting Links

88) US deposit rates versus the CPI
87) US bank borrowing cost to lending rate
86) US annual budget deficits
85) US debt to tax receipt growth
84) US median priced home
83) US debt to GDP ratio
82) US trade deficits
81) Emergency purchases of US debt by the Federal Reserve
80) US debt to personal income ratio
79) US debt to employed population
78) US debt to hourly earnings
77) US mortgage delinquency
76) US debt to GDP ratio relative to China
75) US growth ratio relative to China
74) US trade deficits relative to China
73) USD against China’s currency (Renminbi)
72) US Versus China’s short term interest rates
71) Offshore Chinese Renminbi Market (CNH)
70) Chinese Renminbi/USD Futures
69) Chinese Renminbi/USD Quotes
69) US credit rating versus other countries
68) US Treasury debt held by non US investors
67) Treasury auction basics
66) US debt service cost to tax receipts
65) CPI using pre 1980 & 1990 calculations

64) CPI ABC chart
63) Current CPI ABC chart
62) Why inflation does not match the true CPI
61) US Debt, Tax receipts and CPI
60) Tax receipts. median home, M1, gold, CPI
59) The last tightening cycle
58) Fed funds contract valuation chart
57) Current Fed funds chart and all historical data
56) US FEDERAL DEBT 1966 to 2019
55)
US Debt service cost

54) Federal debt to debt service cost
53) Bloomberg Fed funds quotes
52) CPI using current calculation methods
51) CPI using the Fed 1990 calculation methods
50) BLS.GOV “official CPI
49) Federal debt, M1 and CPI

Resources

16) Chicago Mercantile Exchange rate commentary
15) CME interest rate contracts
14)  Videos
13)  Educational material
12)  Getting started CME
11)  Real-Time Trading Simulation
10)  Bloomberg Live

9)    Reuters
8)    Washington Post
7)    MSNBC
6)    CNN
5)    The Financial Times
4)    CBS Market Watch
3)    Current key rates
2)    Economic calendar
1)   
Review 2

Peter Knight
Advisor

Contact details


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Disclosure

 

Trading 3 Month Deposit Rates Higher (Dec 2016 GEZ16)

1) Click here for the last 24 hours of rate news, here past week, here past month
2) Click here for the December 2016 risk/reward spreadsheet
3) Click here for the latest disclosed Fed guidance on short term rates
4) Click here for what this rate is and how it’s set

Below is a simplified trade to capture the move higher in 3 month rates contact me with questions or for more advanced strategies with a superior return on maximum risk.

Trading this rate higher from 0.82% (December 2016 delivery GEZ16)

5) Click here to enlarge the December 2016 rate, price valuation chart below.

Screenshot_131
Instructions on how to experiment with any potential outcome for this trade.

6) Click here and open the December 2016 risk/reward spreadsheet, when it opens enable it

7) Click here for current quotes, here for a current chart

8) Spreadsheet entries

A) B-3 Enter any contract price in  cell B-3
B) C-3 Shows the rate the contract price represents
C) D-3 Initial investment (enter any amount)
D) E-3 Net profit or loss
E) F-3 Net liquidating value
F) C-4 To change the leverage change deposit per contract

Click here to enlarge the image below

Screenshot_132

9) Click here to contact me with any questions

10) Fed versus market expectations

Fed expectations are  entirely different; the last guidance was over 3.2500% by December 2017
(3 month rates trade +0.25% to +0.30% higher than the Fed Funds rate)

Click here to enlarge the difference valuation table below

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11) Click here for supporting links,charts, videos, reports on the Fed’s website

Screenshot_887

8) If you’d like to track additional interest rate positions send us a message or schedule an online review .

8.1) All US interest rate markets we trade 
8.2) European interest rates
8.3) Australian Interest rates
8.4) Educational videos and Links

Regards,
Peter Knight Advisor

—————————————————————-

Privacy Notice

Disclosure

 

What I see on the horizon –

Impact on Depositors

1) During “economic stimulus” depositors in US debt have endured the the largest negative rates of return for the longest period of time in history. These depositors have been stripped of trillions in interest income to save the US Treasury the same amount in debt service costs. According to the Fed this translates into “economic stimulus”.

2) Deposit rates normally trade above the consumer price index in red below, any deposit rate below the red line represent a negative rate of return. 

Click here for a current chart and all supporting historical price data

Screenshot_954

3) If the Fed makes good on their pledge to let rates rise it equates into a 300 billion dollar annual raise for depositors by the end of 2016.

4) 300 billion will provide true economic stimulus to the free market economy rather than “retained” by the US Treasury to reduce debt service costs.

5) The downside for these depositors is they will be impacted adversely once again when dollar devaluation engages as the US monetizes debt in an attempt inflate out of their current debt crisis.

Impact on Banks

Banks never lowered the prime rate it has remained unchanged at 3.25% since 2009.

6) The 60 year average spread between the Prime and Fed funds rate is 2.00%, it has remained unchanged at 3.10% since 2009 or 1.10% above the historical average.

Average credit card rates of 13.00% did not decline during “economic stimulus”  allowing banks the largest profit margins on their borrowing costs for the longest period of time in history. The Fed believes banks overcharging borrowers trillions also qualifies as “economic stimulus”,

Below the Fed funds borrowing rate in red, Prime Rate in black. Unless Bankers grown a conscience I believe this 3.10% spread will be the new norm.

7) Click here for the chart and all supporting historical data

Screenshot_1085
Impact on traders

For Traders the first rate hike since 2006 will generate unprecedented trading opportunities.

8) “Economic stimulus” by the numbers was the most costly economic failure in history. The US’s numbers are currently far worse than at the start of “economic stimulus”

US’s numbers in 2015

9) The US currently has the worst debt to tax revenue ratio in US history

Click here for a current chart and supporting historical data

Screenshot_956

10) The worst debt rating in history.

12 countries now have higher debt ratings than the U.S.

Click here for the complete report

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11) The worst debt to personal income ratio in history

Click here for the supporting chart and all supporting historical data

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12) The worst debt to the employed population ratio in history

Click here for the supporting chart and all supporting historical data

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13) The worst debt to earnings ratio in history

Click here for the supporting chart and all supporting historical data

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14) The largest amount of US debt held by non US investors

Click here for the chart and all supporting historical data

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Breakdown of who owns US debt

Screenshot_102315) The worst debt held by non US investors to dollar index ratio in history

Click here for a current chart and all supporting historical data

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16) The largest amount of debt purchased and held by Federal Reserve Banks in history.

The Federal Reserve has had to buy over 4 trillion in Treasuries and bad mortgages with money they created with keypunch entries back by no tangible asset or income flow. The creation of money backed by nothing will be eventually be inflationary.

Click here for a current chart of Fed held debt and all supporting data

Screenshot_972

17) The worst national debt in history

Average annual budget deficits during “economic stimulus” 2008 to 2014 were 1.4506 trillion

Click here for the supporting chart and all supporting historical data

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18) The worst debt service cost in history

During “economic stimulus” the US national debt increased by 93% with tax receipts increasing by only 28%.

2008 national debt = 9.4 trillion
2008 tax receipts = 1.4 trillion

2014 national debt = 18.1 trillion
2014 total US tax receipts = 1.8 trillion

Each 1% increase in rates now consumes over 10% of total US tax receipts

It’s become unsustainable and now irreversible without monetization of US debt

Click here for the report

Click here for the chart and all supporting historical data

Screenshot_1007

19) The worst debt to GDP ratio in history

Click here for the chart and all supporting historical data

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20) The worst debt to GDP ratio relative to the world’s second largest economy China in history.

Click here for the chart and all supporting historical data

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21) The worst growth ratio relative to the world’s second largest economy in history

Click here for the chart and all supporting historical data

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22) The worst US trade deficits in history

Click here for the chart and all supporting historical data

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23) The worst negative rates of returns for depositors for the longest period of time in history

Click here for the chart and all supporting historical data

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24) The largest profit margins for banks on loans relative to bank borrowing costs in history

Click here for the chart and all supporting historical data

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25) The worst mortgage delinquency rates in history. Mortgage delinquency rates currently remain higher than at the start of “economic stimulus” and more than twice the historical average.

Click here for the chart and all supporting historical data

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26) The worst debt per US taxpayer in history.

Per capita taxpayer debt has skyrocketed from 67K to over 130K per taxpayer during “Economic Stimulus” This increase represents a debt service cost per US taxpayer when interest rates “normalize” of $6,630 annually or $552.50 monthly.

Click here for a current chart

Screenshot_408

27) The largest bank bailouts in history, over 7.7 Trillion was undisclosed until the Fed was orderd in court to disclose it plus an additional 700 billion during the Toxic Asset Relief Program (TARP)

28) The worst Fed disclosure in history, below is the Fed Inspector General clueless about 9 trillion

29) The worst BLS.GOV creditability in history. Currently less than 8% of economic analysts  believe U.S. inflation, employment and other BLS.GOV economic releases are being reported correctly.

Click here and here for more information

Screenshot_985

Percent change in price versus the CPI, you don’t have to be a Rhodes Scholar to determine the CPI calculations currently being released are beyond misleading.

Click here to enlarge the table below, click here for the source

Screenshot_1048
30) We can thank Bernanke the architect of the most costly economic policy failure in US history for generating the extreme economic fundamentals which will fuel the major market moves on deck.

31) Bernanke enjoys the worst track record for his calls on the economy of any Fed chair on record before, during and now after being Fed chair.

Click here for the report on Bernanke’s calls on the economy versus what actually occurred.

32) Yet Bernanke’s with his consistently bad calls prior to becoming Fed chair was still appointed to be the head of the World’s largest private and unaudited central bank.

33) Bernanke was given unaudited discretionary authority over trillions of dollars in amounts that rivaled the US’s 18 trillion dollar GDP.

Unsustainable and now irreversible

34) Because of the decisions made by the Fed and administration, the US can no longer service its debt

If interest rates “normalized” over 50% of all tax receipts would be consumed by debt service cost alone.

Yellow current debt service cost
Red debt service cost if interest rates “normalized”
Orange debt service cost if inflation was reported  by 1980 BLS.GOV calculations

Screenshot_980

35) Using the 2008 – 2014 average budget deficit of 1.45 trillion this additional debt service cost could generate record annual U.S. budget deficits of over 2 trillion annually.

Click here for the chart and all supporting historical data

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36)  Now that reality is engaging the US’s status as “flight to quality” world reserve currency is being questioned with trades beginning  to unwind in dollar denominated investments and dollars.

Click here for the chart and all supporting historical data

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37) Federal debt currently held by non US investors exceeds 6 trillion, trillions more are in muni’s and corp. debt.

Currency risk for these investors is more in one day than annual yields

Click here for the chart and all supporting historical data

Screenshot_983

38) Most non US investors already have their finger on the USD sell trigger. The consensus is the risk on the USD and USD debt instruments/shares currently outweighs any potential gains.

Alternatives

39) There are 12 countries that currently have higher debt ratings than the US most have the same or higher interest rates, click here for for a current debt ratings.

40) Positioning in tangible assets metals, energy and real estate make more sense than US Treasuries with the dollar near a 10 year high and debt instruments near all time highs

41) Scores of international investments currently have a higher return on risk versus dollar denominated investments.

China’s impact on the global financial markets.

42) China’s currency is now on deck to become the world’s 5th world reserve currency as early as October 2015 at the latest by the end of 2016.

43) China’s numbers according the the Federal Reserve are superior to the US’s, UK, Euro-zone and Japan

44) By the numbers the IMF is fearful of accepting China’s currency as the 5th world reserve currency

45) The IMF is concerned acceptance as the 5th would reserve currency could ignite sales of debt and shares by the trillions in the US, UK, Euro, Japan and change the global financial markets as we know them today, click here , here and here for more information.

China’s numbers versus the US according to the Fed

46) China’s growth according to the Fed is superior to the US’s

Click here for a current chart and all supporting historical data

Screenshot_1042

47) China’s debt to GDP ratio is 5 times better than the US’s according to the US Federal Reserve.

Click here for the chart and all supporting historical data

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48) China’s balance of trade versus the US is far better.

Click here for the current chart

Screenshot_991

49) China’s currency in part pegged to the US dollar has still appreciated by 14.46% during “economic stimulus” moving from 7.26 to the US dollar to 6.21.

Click here for the chart and all supporting historical data

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50) International investors now see China as a violable alternative to US, UK, Euro and Japan as they de-peg further from the US dollar.

Some 95 per cent of all global foreign exchange reserves are invested in just four currencies: the US dollar, the euro, the yen and sterling. The central banks of the ‘Big Four’ are all expanding their balance sheets or have been doing so for years with no sign of immediate reversal. They are all trying to convert huge debt problems into inflation problems, and when they succeed their currencies will weaken sharply.

In this currency war, EM central banks risk suffering the most collateral damage. Their reserves – so many of them held in the big four currencies – will be decimated in purchasing power terms. The world will become desperate for alternative currencies to act as replacements for the traditional reserve currencies once their currency debasement efforts really take root.

So far, only one country, China, appears to have spotted the opportunities presented by this situation. Most others merely watch the dollar in fear.

China’s renminbi will become a global reserve currency in the not too distant future. China will benefit enormously from becoming a global reserve currency – not only will its currency become far more stable, but China will also no longer need so many reserves. The excess reserves can then be used for sovereign wealth fund purposes, including the AIIB. Finally, China will be able to increase consumption, because it no longer needs to suppress domestic demand in order to maintain high levels of reserves.

But the world will need more new reserve currencies than just the renminbi. This means that other large EM countries such as Mexico, Brazil, India and others could also benefit from the opportunity that China is now exploiting. With sensible planning and prudent policy implementation, they too can become global reserve currencies.

Technocrats in EM central banks are aware of these issues but face tremendous challenges in convincing their boards of the need to diversify into other currencies. That is why China’s move is so important. The renminbi’s ascent to reserve currency status will demonstrate the huge benefits of diversifying away from the ‘Big Four’ currencies. China will soon have to sell treasuries as its reserves become true ‘excess’ reserves. It is likely to seek to invest the cash in less mainstream currencies. Other EM central banks will ultimately reciprocate by buying renminbi. As each major EM central bank diversifies, not only will it be good for other EM currencies, it will also help all of them to reduce their excess exposures to the ‘Big Four’ QE currencies.

51) China’s short term interest rates are near 5.00% versus the US’s. 0.03%.

Click here for the chart and all historical data

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52) China’s credit rating continues to climb while US’s debt rating is having trouble maintaining, Hong Kong which is Special Administrative Region of the People’s Republic of China currently has a higher debt rating than the US at AAA as ranked by US debt ratings agencies.

Click here for ratings

Screenshot_989

53) Up until the 1880s China had been the World’s largest economy for several hundred years, currently “The Economist” has a online poll as to when China’s GDP will again surpass the US’s the poll’s current estimate is 2021.

Click here for the report and poll

Screenshot_992

In preparation of the Renminbi becoming a World Reserve Currency the World’s largest dollar volume exchange group has listed Renminbi futures against both the USD and Euro.

54) Offshore Chinese Renminbi Market CME report

Screenshot_418

Renminbi Versus the USD

55) Chinese Renminbi/USD Futures
56) Chinese Renminbi/USD Quotes

Renminbi Versus the Euro

57) Chinese Renminbi/Euro Futures
58) Chinese Renminbi/Euro quotes

59) The the spread between China’s currency and the US dollar could be nearly as volatile as when Switzerland de-pegged from the Euro unless there is coordinated intervention to contain this volatility.

Click here for the supporting chart

Screenshot_988

What I see happening over the next 30 months

60) Rates will rise igniting major market moves

Click here for a chart to monitor US rates and the curve forward

Screenshot_993

US Federal debt will lead the sell off as 6 trillion held by non US investors liquidate

61) Click here for the supporting chart and all supporting historical data
Screenshot_1049 62) Once the sell off fully engages I believe liquidity may be an issue not only in the secondary debt markets but the primary as well.

63) 10 Year Notes, each point = $1,000 (Short)
Click here for quotes

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64) 5 Year Notes, each point = $1,000 (Short)
Click here for quotes

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65) 2 Year Notes, each point = $2,000 (Short)
Click here for quotes

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66) 3 month USD deposits outside the Treasury system each point = $2,500 (Short)

This contract is the most liquid contract on the board with an open interest of over 28,000,000 million contracts representing a face value of over 28 trillion, an amount that exceeds the combined GDP’s of  the US and China.

Click here for quotes

Screenshot_998

67) Fed funds, each point = $4,166.67 (Short)
Click here for quotes

Screenshot_997

Where the market is pricing rates and when

68) Fed funds futures will give you excellent indication of what market expectations are for the Fed Funds rate to the 0.01% monthly through August 2018 click here for current quotes.

69) To convert the contract price into the rate it represents take 100.00 subtract the contract price = the rate.

Example; December 2017 is currently trading at 98.3250, 100.0000 – 98.3250 = 1.6750%
To calculate contract value multiply the rate by $4,166.67, in this case 1.6750 X 4,166.67 = a contract value of $6,979.17

70) Click here for current quotes, here for the complete report and example trades

Screenshot_958

Where the fed is pricing the rate they set and when

71) The Fed’s view as to where they expect the Fed funds rate by Dec 2017 is entirely different; the last guidance from the Fed was 3.2500% by the end of 2017|

72) Click here for the full report.

What the difference between Market and Fed expectations is worth

73) If the Fed is right about the rate they set the contract price will fall from the current 98.3250, representing a rate of 1.6750% and contract value of $6,979.17 to 96.7500 representing a rate of 3.2500% and contract value $13,541.68 for an increase in contract value of $6,562.50 or +100%.

74) Click here for the complete report
75) Click here to enlarge the valuation table below

Screenshot_963

US equities will sell off

76) Volatility will be high and liquidity will be questionable when the move fully engages I’ll be using trades that define risk on the trade but for the duration of the trading period.

77) Click here for an example trade explaining how this is done

78) Click here for current S&P quotes

Screenshot_999

79) Non US investor selling will engage more aggressively further pressuring US debt and share to the downside as trillions in US dollar denominated investments and US dollars unwind.

Click here for the supporting chart and all supporting historical data

Screenshot_983

Non US investors will liquidate dollars aggressively

80) With dollar sale proceeds non US investors will shift assets to any of the 12 countries that currently have higher debt rating than the US, and/or countries with expanding economies, higher rates and trade surpluses with better governmental fiscal numbers.

Click here for the Fed USD index chart and all supporting historical data

Screenshot_982

The Fed now has achieved their goal for justifying more “Quantitative Easing”

81) More “Qualitative Easing” will engage in an attempt to cauterize the US financial hemorrhage with the Fed once again bailing out Banks first then the U.S. Treasury at the expense of depositors and borrowers consistent with past QE and their long term plan of monetizing the US national debt.

82) Click here and monitor this chart Fed chart as QE re-engages I believe the cumulative total before this is all over will exceed 9 trillion.

Screenshot_972

83) True Inflation will aggressively engage but won’t be reflected accurately in the BLS.GOV CPI numbers in order the Fed/Administration to justify keeping rates at artificial lows to save the Treasury trillions and all other increases that are tied to inflation such as debt service cost, wages and benefits.

84) When looking at the chart below you don’t have to be a Rhodes scholar to question the creditability of the BLS.GOV CPI numbers in orange as 92% of economic analysts already do.

Click here
for the current Fed chart and supporting historical data on the Fed’s site….

Screenshot_854

Rally in tangible assets

85) True inflation will be much higher than reported inflation pressuring tangible assets like Metals, Energy and most Commodities prices higher,

I believe we’ll see a new record high in gold by 2017 with volatility high, my call for the bottom $831, high $2610 by Dec 2017.

Click here for gold quotes each $1.00 move = $100 per contract,

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86) As true inflation more aggressively engages from the Fed’s  trillions more in QE money supply (M1) will increase by an even greater amount than 2008-2015.

87) An increase in money supply decreases the buying power of the USD and Inflates prices, higher prices will generate higher tax receipts as it has done during every monetization cycle since the US went off the gold standard and became a “Fiat currency

88) Click here for the current Fed chart and all supporting historical data

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Impact on the US Treasury

89) The majority of US debt is currently fixed in 10 plus year Treasury durations.

Average yield on US debt is 2.37%, 1954-2015 Average 5.10%

90) Current debt service cost at a percent of tax receipts pre monetization 

Yellow = current treasury rate with debt service consuming -23.41% of total tax receipts
Red = 1954-2015 average Treasury rate with debt service consuming -50.28% of tax receipts
Orange what rates would be using BLS.GOV calculations from 1980, -92.88% of tax receipts

Screenshot_403\

As US’s creditability dissipates the yield curve will invert

91) Not to the extent of 1980 when the US national debt was 40% of GDP and approaching 1 trillion  due to accurate CPI reporting.

92) Rates and the curve inversion will be contained by the BLS.GOV “revised” inflation calculation methods in place since 1978,

93) Inflation versus rates since BLS.GOV inflation calculation “revisions”

A) The curve inverts with short term rates exceeding long term rates in 1979
B) “Revised” BLS.GOV  inflation calculations engage 1978-1980
C) Gullibility and greed engage with the market giving the “revised” BS.GOV inflation calculations creditability curing the inverted curve from 1981 until 2015

94) Click here for more information on how inflation revisions have impacted the CPI calculations.

95) Click here for the chart and all supporting historical data

Screenshot_1003

96)  Money supply will escalate dramatically, true inflation will engage with a vengeance which will not be accurately reported by BS.GOV reporting but will show in tangible assets like gold, energy, commodities and real estate.

97) Below CPI numbers reported by BS.GOV in red relative to gold and real estate

98) Click here  to monitor this chart once the next round of  “Qualitative Easing” engages.

Screenshot_1005

99) As U.S. Treasury debt is currently fixed in an average duration exceeding 10 years at 2.37% the impact on debt service for the US Treasury be minimal.

100) Debt should monetized (devalued) before these Treasuries mature.

101) Debt service cost table post debt monetization

Yellow = current treasury rate with debt service consuming -11.71% of tax receipts
Red = 1954-2015 average Treasury rate with debt service consuming -25.14% of tax receipts
Orange what rates would be using BLS.GOV calculations from 1980, -46.44% of tax receipts

Screenshot_402

102) Bernanke explains monetization in this speech prior to becoming Fed chair Deflation Making Sure “It” doesn’t Happen Here which earned him the nickname “Helicopter Ben

103) Monetization is nothing new countries have been doing it since the first fiat currency was introduced in 1000 AD.

The Chart below clearly shows the direct correlation between M1 in black and tax receipts in green

104) Click here for a current chart and all historical data

Screenshot_401

105) Monetizing  the US debt lower is currently the only option left for the US.

The main reasons why it may not work this time round is the size of the US national debt and the ability of US politicians and citizens to outspend the tax receipt increases generated by dollar devaluation.

Click here for a current chart

Screenshot_1001

106) What the Fed didn’t take into consideration trying to inflate out of this mess is the trillions in borrowed money wasn’t spent in the US generating higher tax receipts, the money left and continues to leave the US though record trade deficits.

Click here for the current chart

Screenshot_1010107) One conclusion I’m very confident in making had the trillions lost to trade deficits over the past 30 years in chart 102 above remained in the United States the chart below would look entirely different today.

Click here for a current chart

Screenshot_1001

The upside

108)  Greenspan, Bernanke and Yellen’s  Incompetence, arrogance coupled with the lack of political leadership has cumulatively generated the best trading opportunities I’ve seen in my 25+ year career and we still have choices in 2015

109) We can all sit around and wonder how incompetent political ass kisses like Greenspan, Bernanke and Yellen could have been appointed to run the world’s largest, private and unaudited central bank or

We can protect our portfolios and expend our time and energy on capturing the major market moves that will generated by their incompetence.

110) We can all wonder how Greenspan, Bernanke and Yellen were all given full discretion over undisclosed trillions dollars and granted the ability to make unaudited and vaguely explained decisions that have adversely impacted 100’s of millions of Americans, their children and the global economy or

We can protect our portfolios and expend our time and energy on capturing the major market moves that will  generated by their incompetence.

111) I for one are going to be positioned using defined risk trades to capture the major market moves. If you’d like to talk long term hedge or speculative trading strategies for any of the 400 major markets that will be impacted contact me.

Regards,
Peter Knight Advisor

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Hedging Treasury Risk –

If you’re stubborn about holding Treasuries with the pending rate hike and you or your manager doesn’t hedge downside risk you’ll have no one to blame but yourself.

Using an option collar provides protection by selling a call option against your position and using the collected premium to purchase a put option to define downside risk.

1) Benefits

Risk is defined on the trade and for the duration of the trading period

Loses will be limited when the Fed finally engages with rate hikes

If the market stays the same you’ve collected approximately as much time premium as you’ve purchased

2) How it works, start by checking the chart

Click here for a current chart

Screenshot_929

3) Check your ranges

To determine realistic risk reward levels consistent with the duration of the trade. In this example I’m trading the September 10 Year which goes off the board 21, August 2015 or 18 days from the 3 August 2015 entry.

Click here for current ranges

Screenshot_927

4) Establish your position.

Long the September T-Note at 127 26/32

Sell the 128 32/64th call against the long position collecting $335.94

Using the collected premium buy the 126 32/64th put paying $298.06

Screenshot_928

5) To experiment with any potential outcome for this trade

Click here to open the corresponding risk/reward spreadsheet, enable it, enter any price into cell C-2

6) Worst case scenario

Rates skyrocket, Treasuries sell off hard to 110 0/32nds for a loss in contract value of -17,812.50 or – 13.93% but because we’re hedged our loss was limited to -$1,266

Screenshot_924

7) To confirm

A) Enter 110 0/32 in cell C-2
B) Net loss shows in cell E-2
C) Net liquidating value shows in cell E-3

Screenshot_930

8) The market stays the same you’ve collected your credit premium of $47 plus your interest income.

A) Enter 127 26/32nds in cell C-2
B) Net loss shows in cell E-2
C) Net liquidating value shows in cell E-3

Screenshot_931

9) Rates move lower, Treasuries rally, the position is called away at a $734 profit plus your interest income and we can reestablish the position immediately.

A) Enter 2,000 in cell C-2
B) Net loss shows in cell E-2
C) Net liquidating value shows in cell E-3

Screenshot_932

For more advance traders we can write a put below the market for reentry where the only way we could be delivered a position is at a better price,  if the market never goes down to the strike we keep the premium.

Example the 127 put is nearly a full point below the market with a time decay of 0.06% per month or 7.24% annually (far more than the interest income)

If delivered a position you can collar it explained above

Or

You can write a call above the market for example 128 16/32 collecting 0.07% per month or 8.5% annually ,the only way the position can be called away from you is at a profit 0.54% or you were paid 0.7% for that month to sell it at a profit (in at 127 26/32nds out at 128 12/32nds).

Using this strategy the worst thing that will happen to you is you would own a bond that you would have bought or already owned anyway.

Contact me for more information on yield enhancement

These strategies can be traded in any liquid market, crude oil and grains have the highest premium currently relative to contract value.

Regards,
Peter Knight Advisor

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Trading the S&P using collars –

An option option collar provides defined risk on a long or a short position by selling an option against your position and using the collected premium to purchase an option to protect your position and objectively define risk

1) Benefits

  • Risk is defined on the trade and for the duration of the trading period
  • The position cannot be stopped out
  • If the market stays the same you’ve collected approximately as much time premium as you’ve purchased
  • The only way the position can be called away is at a profit

How it works

2) Identify the current trend using a long term daily chart.

The chart below shows the trend neutral with the S&P looking ready for a correction. 

Click here for a current chart

Screenshot_917

3) Check your ranges

Determine realistic risk reward levels consistent with the duration of the trade. In this example I’m trading the September S&P which goes off the board 18 September 2015 or 46 days from our 3 August 2015 entry.

Click here for current ranges

Screenshot_919

4) Establish your position.

  • Short the September S&P at 2,094.50
  • Sell the 2,060 put against the short position collecting $1,212.50
  • Using the collected premium buy the 2,115 call -$1,187.50

Screenshot_919 2

5) To experiment with any potential outcome for this trade

Click here to open the corresponding risk/reward spreadsheet, enable it, enter any price into cell C-2

6) Worst case scenario, the market rallies against your short position to 3,000

A) Enter 3,000 in cell C-2
B) Net loss shows in cell E-2
C) Net liquidating value shows in cell E-3

Screenshot_920

7) The market stays the same

A) Enter 2,094.50 in cell C-2
B) Net loss shows in cell E-2
C) Net liquidating value shows in cell E-3

Screenshot_921

8) The market sells off and the position is delivered at a profit

A) Enter 2,000 in cell C-2
B) Net profit shows in cell E-2
C) Net liquidating value shows in cell E-3

Screenshot_922

This strategy can be traded in any liquid market
x

Click here for contact details

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RISK DISCLOSURE STATEMENT

PROGRAM AVAILABILITY IS DEPENDENT ON YOUR COUNTRY OF RESIDENCY AND FINANCIAL STATUS

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.

The math on why U.S. inflation is so “contained” = Monetization –

1) The U.S. Treasuries problem

Currently each 1.00% increase in rates consumes 10% of total U.S. tax receipts.

Click here for the current Fed chart

Screenshot_848

2) If you’re in the 8% minority that believe the BLS.GOV CPI calculations are correct the average annual CPI during the “Great Recession” has been 1.58%

Click here for current BLS.GOV numbers

Screenshot_849

3) If you are in the 92% that currently do not give BLS.GOV inflation numbers creditability you’re supported by actual increases.

Screenshot_885

4) 1980 and 1990 inflation calculations also support the 92%

5) Click here for current charts and more information on 1980 & 1990 CPI calculations.

Using 1980 BLS.GOV calculation methods the inflation rate would be greater than 7.50%

Screenshot_851

6) Using 1990 BLS.GOV calculations the inflation rate would be near 4.00%

Screenshot_850

By the BLS.GOV massaging the CPI lower (as they have through their current revisions and “enhanced calculation methods”)  the BLS.GOV has saved the .GOV trillions in debt service costs and reduced all other cost increases that are tied to inflation.

7)  Where rates should be using current BLS.GOV inflation calculations if you are in the 8% minority that give them creditability.

The 40 year average for Treasury yields is 2.14% above the CPI, the current average Treasury rate is 2.37%

Click here for the current Fed chart and supporting historical data

Screenshot_852

8) If yields went back in line with the 40 year average above the CPI Treasury yields would increase from 2.37% to 3.72% for an increase in debt service cost from the current 430 billion to 675 billion annually

Debt service cost alone would consume 36% of total U.S. annual US tax receipts.

Click here for current debt service cost

Screenshot_853

9) Where rates would be relative to historical averages

If yields went back in line with their 40 year average the average Treasury rate would increase from 2.37% to 6.14%. Debt service cost would increase from 430 billion annually  to 1.117 trillion consuming 64% of all annual tax receipts.

Where rates would be using 1980 BLS.gov calculation methods for the CPI

The current CPI using 1980 calculations would currently be 7.57%.

Using the historical average Treasury yield above the CPI Treasury the average Treasury yield would rise to 9.71% increasing the debt service cost from 430 billion to 1.77 trillion consuming 97.25% of total US tax receipts.

Can you see why the BLS.GOV needs to massage the CPI numbers lower to bailout their parent company the .GOV?

10) Pre BLS.GOV revision magic

The CPI in orange,  debt in red, M1 in blue and tax receipts in green all move together.

Click here for the Fed chart and supporting historical data

Screenshot_856

11) Post BLS.GOV revision magic

You don’t have to be a Rhodes scholar to come to the conclusion the BLS.GOV’s inflation numbers would justify a name change for BLS.GOV to just BS.GOV.

Click here
for the current Fed chart and supporting historical data

Screenshot_854

12) During the “Great Recession” and “Economic Stimulus” the U.S achieved the worst credit rating and debt to GDP ratio in history.

Click here for the current Fed chart and all supporting historical data

Screenshot_857

13) The worst debt to tax receipt ratio in history

Click here for the current Fed chart and all supporting historical data

Screenshot_858

14) The worst debt to disposable income ratio in history

Click here for the current Fed chart and all supporting historical data

Screenshot_859

15) The worst debt to the employed population ratio in history.

Click here for the current Fed chart and all supporting historical data

Screenshot_860

16) The worst debt to hourly earnings ratio in history

Click here for the current Fed chart and all supporting historical data

Screenshot_861

17) The worst debt to the dollar index ratio in history

Click here for the current Fed chart and all supporting historical data

Screenshot_862

18) Nearly every ratio is far worse than pre “economic stimulus”

Many including myself  believe  “economic stimulus” has created a far greater problem for the U.S. economy than the one it was designed to solve.

19) Why rates will rise

What everyone seems to forget up until 2008 the market basically controlled Treasury rates not the Fed.

When a country like the US needed money to finance deficit spending it created debt instruments that were sold at auction with the buyers setting the rate at auctions based on a country’s debt rating, creditability and economic outlook.

20) Click here for Treasury auction basics.

From 2008-2014 the Fed created trillions of dollars backed by no tangible assets or income flow the buy the majority of all new issues (up to 85 billion per month) to force and hold rates at artificial and unsustainable lows (Quantitative Easing)

21) This essentially shut down free market Treasury auctions and the free market determining a fair rate.

Click here for the current Fed chart and all supporting historical data

Screenshot_863

22) To put this into proper perspective 85 billion per month is 1.020 trillion annually or an amount more than twice the national debt in 1971 the year the US abandoned the Gold Standard.

Click here for the current Fed chart and all supporting historical data

Screenshot_865

23) Buy forcing rates to artificial lows the Fed created the largest negative rates of return for the longest period of time in history for holders of US debt..

Fed policy striped these “savers” and the free market economy out of trillions of dollars to save the U.S. Treasury the same amount in debt service cost, note the yields below the CPI during “economic stimulus” = a negative rate of return.

Click here for the current Fed chart and all supporting historical price data

Screenshot_866

24) Meanwhile banks never lowered the prime from 3.25%, the same banks that created the problem were allowed to lock in the largest profit margins on their borrowing costs in history for the longest period of time in history, note the Fed Funds borrowing rate relative to the prime rate the spread is 3.15% or more than 50% higher than the historical average of 2.00%.

Click here for the Fed chart and all supporting historical data

Screenshot_867

25) The Fed’s theory was to increase money supply, lie about inflation (with the help of BLS.GOV) and helicopter Ben Bernanke would inflate the U.S out of the recession back into artificial and unsustainable prosperity.

Bernanke outlines what his game plan was well before he became the chairperson of the Federal Reserve in this speech “Deflation Making Sure It Doesn’t Happen Here”

26) Click here for this speech posted on the Fed’s website.

2& His unproven theory was/is there is a direct correlation between the increase in M1 and tax receipts which  is as true,  inflation engages, prices of goods and services rise with it tax revenue.

Click here for the current Fed chart and all supporting historical data

Screenshot_869

28) What Ben didn’t take into account was the ability of U.S. politicians to outspend true inflation and tax receipt increases.

Click here for the current Fed chart and all supporting data

Screenshot_870

29) Nor did he take into account the the banking problems we’re slightly larger the TARP (700 billion) when CBS and Bloomberg were able to obtain the true figures through the Freedom of information act the total exceeded 7.7 trillion

30) Nor was his team prepared or honest

Rep. Alan Grayson questions the Fed inspector General where $9 trillion dollars went… the Fed inspector general elizabeth coleman didn’t have a clue or was it the 5th?

31) But being wrong and/or incompetent was nothing new to Ben Shalom Bernanke, B,S. Bernanke was consistently wrong on his calls on the economy before and after he became Fed chairman.

Click here for the video of his calls and the outcome

Screenshot_871

32) How U.S. “leaders” could let him orchestrate an unaudited, undisclosed mult-trillion dollar “economic stimulus” plan with his proven track record for failure is beyond me.

Economic stimulus did save the U.S. Treasury trillions in debt service costs at the expense of savers.

It did make banks trillions in inflated borrowing costs at the expense of borrowers.

It did increase the per capita portion of the national debt for every American taxpayer from 67K to over 130K.

33) Now without the Fed creating trillions of dollars with keypunch entries to buy the majority of US debt at non competitive prices who’s going to replace the Fed?

Click here for the current chart and all supporting historical data

Screenshot_872

34) If the Fed fires up the QE printing press again US creditability will deteriorate even further potentially leading to 6 trillion in foreign held US debt being sold off.

Click here for the current Fed chart and all supporting historical data

Screenshot_873

35) USD currency risk for these foreign investors is more in one day than annual yields

The dollar is near a 10 year high and the world is questioning if the USD truly is the least worst place to be?

Click here for the Fed chart and all supporting historical data

Screenshot_874

36) Would you buy a U.S. Treasury with current currency risk at the rates below?

Click here for current Bloomberg quotes

Screenshot_875

37) China’s currency is also on deck to be the world’s 5th world reserve currency and their numbers according to the Fed are far superior to the US’s

38) Click here for China versus the US using the Fed’s numbers

Screenshot_880

39) From historic lows near zero what is the only direction short term rates can have a major market move?

Click here for the current chart and all supporting historical data

Screenshot_876

40) Rates will rise from either economic recovery or deteriorating U.S creditability the only question that remains is when.

41) Fed chair Yellen has spelled out where the Fed expects rates and when on multiple occasions over the last year,

Call if you have questions, need additional information, or wold like to do a 15 minute online review where I’ll show you exactly what we’re trading and how using actual trades.

When our review is complete you’ll be able to experiment with any potential outcome for these trades or your own risk/reward criteria.

If you have any questions contact  us.

Regards,
Peter Knight Advisor

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Privacy Notice

Disclosure

 

 

Where the Fed Sees Rates and When

Fed expectations for hikes through December 2020 (as of 13 June 2018)
Full Fed press conference video (52:19) & Opening Statement (PDF)
Next Fed Meeting 31 July – 1 August 2018

Educational Links US Rate Analysis Euro Rate Analysis

2) Fed’s expectations for the rate they set 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 Trade

Entry = 0.8350 value $3,479.17 to Fed Objective 3.40 value $14,166.65

5.1) 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 100.0000 – 3.40 = 99.6000
Rate the contract price represents 100.0000 – 99.6000 = 3.4000%
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) Trading the rate hikes between September 2018 and December 2020

Entry = 0.39 value $3,900 to the Fed’s Objective 1.40 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) Trading Rate hikes between December 2018 and December 2020

8.1) 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) Trading Rate hikes between September 2018 and December 2023

9.1) Entry the 31th of May 2018
Long 4 September 2018 GEU18 97.5650
Short 4 December 2023 GEU23 – 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 GEZ18 – 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 rates traded
10.1) US Rates Traded
10.2) European Rates Traded
10.3) Australian Interest rates Traded

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

Open An Account

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

—————————————————————-

Privacy Notice

Disclosure

 

Update

State of affairs

13) U.S. economy by the numbers
14) China’s economy by the numbers & World currency status
15) Where the Fed sees rates, when and what the move is worth
16) Bernanke’s calls prior to the “great recession”

Additional reports are available for any major market on the following exchanges.

17) US CME
18) Eurex

19) Euronext
20) Osaka 

My team can establish and monitor all positions according to your criteria

21) Our Structure

Fees
Front load = 0.00%
Management fee 0.00%
Inventive Fee = 10.00% of net new high profits quarterly

To open a test account

22) Direct FX opening instructions
23) Clearing and Exchange Members for larger accounts

24) The world’s largest dollar volume exchange group
25) CME videos
26) Due Diligence and how funds are protected
27) Commodity Futures Trading Commission

Accounts can be funded and maintained in any major currency.
Liquidity in portion or all is 2-48 hours.

If you have questions or would like additional information please call with this page available.

x

Click here for contact details

 

 

——————————————————————————————————————-

RISK DISCLOSURE STATEMENT

WE DO NOT HANDLE US ACCOUNTS

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, 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 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 HYPOTHETICAL PERFORMANCE RESULTS 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 ANY 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 MAY DIFFER FROM THE OPINIONS AND RECOMMENDATIONS FOUND IN THIS REPORT.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN DERIVATIVE CONTRACTS CAN BE SUBSTANTIAL THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING ANY LEVERAGED POSITION AND MUST BE IN A POSITION ASSUME LOSS FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR TRADE RESULTS.

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

March 2016 Hedged –

Click here to open the March 2016 risk reward spreadsheet
Click here for the mini program

1) Maximum risk on this trade = $21,667 through 31 March 2016
2) Net profit at our objective =+$220,521
3) Trading unit $100,000 USD or major currency equivalent, click here for the mini program.

Trading rates higher requires a short position
To convert the contract price into rate it represents take 100.00 – contract price = rate
Each 0.01 change in contract price = $41.67
What the Fed funds rate is and how it’s set

Click here to enlarge the rate, price, contract valuation chart below

Screenshot_751

To experiment with any potential outcome for this trade

4) Click here and open the March 2016 risk reward spreadsheet (hedged)
5) Click here for March 2016 (ZQH16) quotes
6) Enter any contract price in cell B-2
7) The rate the contract price represents shows in C-2
8) Net profit/loss E-2
9) Position liquidation value F-2

10) Maximum potential loss for this trade = -$21,667
X

Screenshot_763

11) Net gain at our profit objective = +$220,521
x

Screenshot_764

12) Click here to open an account and have my team manage this position.

Contact me for other defined risk strategies for any duration from 30 days to 30 years.
Please specify your objective hedging rate risk, speculation or yield enhancement.

Support links

13) Click here for videos of where the Federal Reserve sees rates and when.
14) Click here and here for 400+ reports on where the market/media expect rates and when.
15) Cick here for the Federal Reserve’s meeting schedule & corresponding closing statements.

State of affairs

16) U.S. economy by the numbers
17) China’s economy by the numbers & World currency status
18) Where the Fed sees rates, when and what the move is worth
19) Bernanke’s calls prior to the “great recession”

Additional reports are available for any major market on the following exchanges.

20) US CME
21) Eurex

22) Euronext
23) Osaka 

My team can establish and monitor all positions according to your criteria

24) Our Structure

Fees
Front load = 0.00%
Management fee 0.00%
Inventive Fee = 10.00% of net new high profits quarterly

To open a test account

24) Direct FX opening instructions
25) Clearing and Exchange Members for larger accounts
26) The world’s largest dollar volume exchange group
27) CME videos
28) Due Diligence and how funds are protected
29) Commodity Futures Trading Commission

Accounts can be funded and maintained in any major currency.
Liquidity in portion or all is 2-48 hours.

If you have questions or would like additional information please call with this page available.

x

Click here for contact details

 

——————————————————————————————————————-

RISK DISCLOSURE STATEMENT

WE DO NOT HANDLE US ACCOUNTS

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, 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 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 HYPOTHETICAL PERFORMANCE RESULTS 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 ANY 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 MAY DIFFER FROM THE OPINIONS AND RECOMMENDATIONS FOUND IN THIS REPORT.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN DERIVATIVE CONTRACTS CAN BE SUBSTANTIAL THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING ANY LEVERAGED POSITION AND MUST BE IN A POSITION ASSUME LOSS FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR TRADE RESULTS.

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