How to bet against US treasuries w/o an ETF
Hi I was wondering how one would go about betting against US treasuries without using an ETF.
Is it possible to borrow debt, sell it, and then purchase it again like you would shorting an equity?
Are there futures or other derivatives that allow you to sell treasuries at some point in time?
Thanks for the advice
Andy
treasury futures
You can buy TBT (short treasuries, long yield), very liquid ETF.
The pitfall is its decay, it is a 2x leveraged ETF, hence over (a long) time it will converge to 0. (Google for the theory behind it). If you're looking for intraday hedging or speculation, it should be useful though.
http://seekingalpha.com/article/104703-explaining-inverse-and-leveraged…
[quote=yuri_gagarin]You can buy TBT (short treasuries, long yield), very liquid ETF.
The pitfall is its decay, it is a 2x leveraged ETF, hence over (a long) time it will converge to 0. (Google for the theory behind it). If you're looking for intraday hedging or speculation, it should be useful though.
http://seekingalpha.com/article/104703-explaining-inverse-and-leveraged…]
so why not short it??
Great question. The borrow costs for leveraged ETFs are ridiculous (even at large BBs). Let's say you go short simultaneously both a leveraged ETF and its leveraged inverse, you would make a before-fee profit in the long run because of the decay (and you would be hedged), but it is not an arbitrage. The cost would be too high to actually trade this.
Are you seriously in corp finance? I'll play along....
As PTS said you could short treasury futures but I wouldn't recommend that because seeing how you didn't even know that treasury futures existed... I smell an horrific margin call coming on. You can sell naked out-the-money treasury calls for a further out delivery month. Once again I wouldn't recommend because you could face a margin call. You could buy put options(google delta options) on treasuries either by buying a specific strike price or using a bear put spread. My last two recommendations offer the least likely hood of a blow up on your part. You could use other synthetic option strategies but I think the complexity is too great for you.
Good Luck!
Wow no need to be an ass about it. I wasn't talking about shorting treasury futures and I wasnt the one who made the topic. I'm well aware of what a future is and dont worry, your other "synthetic option strategies" aren't too complex. I was talking about a long term play of shorting the ETF.
What part of my reply leads you to believe that I was talking to you and not the poster of the topic?
Bravo are you in this mkt? Whats the skew like..I was looking to buy some long dated optoins on TBT for my personal account. any thoughts
No disrespect to the OP, but I think even what Bravo is suggesting might be a bit too complex for you. Chances are you´ll lose money...
If its a theoretical question, yes, you can short treasuries, you can short treasury futures, use options like Bravo suggested. You can also receive in a swap and buy the spread, or use interest rate futures, although the correlation there would be smaller.
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