Retail rates trading
Hey,
I'm a freshman in college with a few thousand in cash and more coming from my school IT job. I'm interested in macro investing and I want to start a trading account to learn how I react to risk etc. I'm thinking my strategy should involve rel value trading between UST and TIPS ETFs and inverse ETFs, ETF futures, index futures, fed funds futures, eurodollar futures, repo futures and perhaps vanilla options covering those areas. ETFs interest me because they don't have the fees normally associated with retail trading (futures do however) and I'd have to learn the ins and outs of them in addition to the STIR stuff. Covering the shorter end of the yield curve seems like a better way to learn about the Fed but i'm worried about fees making it too hard to beat any reasonable indexes. I'd love to hear thoughts on the viability of this loose idea, what indexes/benchmarks (like the Bloomberg Barclays 1-3yr UST index or something) I should be comparing my performance to and how much cash I need to be starting with. I also need to figure out what's the best broker/platform for this. I rent a VPS with 8 GB RAM that I use for some other light stuff. Is there anything I could do with the VPS for retail trading to give me an edge?
Thanks so much for any help!
Also, would obv include UST futures in that list of products
bump. I can't seem to find much info on listed ETF futures which is a bit strange. Also doesn't seem like index futures in this area exist.
there isn't an index for govt bonds the way there is for say, the S&P 500...because the S&P 500 is composed of 500 completely different companies.
All US treasuries are issued by the US govt...so the way to trade govt bonds is you pick one bond to buy or sell. they all move similarly over the long term, but not the same because the shape of the yield curve is always in motion.
ProShares TLT and TBT are basket ETFs that hold a basket of UST bonds with different maturities...but there is generally no real benefit to investing in these. Watch ZB futures or the TLT etf...they will move identically
Thanks so much for this info. I really appreciate getting to hear from an experienced rates prop trader. I definitely have a lot to learn about the fundamentals of how USTs work. I've started reading this book's chapter on rates forwards and futures (starts on pdf page 226) (https://fac.ksu.edu.sa/sites/default/files/derivatives_markets_3e_0.pdf). I'd love to hear any other reading recommendations. I'm also going through the NFA booklet to make sure I have exactly down how leverage and margin works etc. I've been thinking today about this strategy where I try to synthetically mimic the composition of an index or ETF with listed derivatives. The benefit would be I would be able to leverage myself a lot more but I'd have to be super careful about setting leverage limits. Is this idea feasible at all lol?
Aside from that, what do you think is the best broker and software platform for futures trading? I'm trying to keep costs down while still having access to quality software.
for a beginner, i suggest TD Ameritrade Thinkorswim. open a retirement account there, and all market data (level 2 for stocks + futures) is free...plus its a decent charting platform.
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