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The_dumpster_diver
Feb 20, 2019 3:11 PM

fomc long box (risk defined) 

iShares iBoxx $ High Yield Corporate Bond ETFArca

Description

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)
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