fomc long box (risk defined)
this is a ghetto nobs trade for a retail investor using bond etfs. its a way of taking advantage of current tightness in bond spreads but likelyhood for expansion of spreads post fomc. in this scenario we'll use hyg (corporate credit) as a proxy for short term notes and tlt as a proxy for long term bonds they have a very nice inverse correlation to one another. so if a participant were expecting tightness in credit markets on a retail basis one could
short corporate credit and go long on longer term bonds. on this play im anticipating a dovish message from the fomc
the international community has favored this stance through their own easing plans.
hyg 50 delta bull call. 100 wide (in out). $.40
tlt bear put .50 delta 100 wide (in out). $.34
both are Low IV plays so the cost basis will be miniscule but the potential payout is pretty sweet with minimal risk (debit paid)
short corporate credit and go long on longer term bonds. on this play im anticipating a dovish message from the fomc
the international community has favored this stance through their own easing plans.
hyg 50 delta bull call. 100 wide (in out). $.40
tlt bear put .50 delta 100 wide (in out). $.34
both are Low IV plays so the cost basis will be miniscule but the potential payout is pretty sweet with minimal risk (debit paid)