Hubert Senters here.
Let’s take a look at some bonds and some examples of how you can trade these things and potentially make money with it.
I am currently of the opinion that I believe bonds are going to go lower and thank goodness they are going lower.
So I think they’re going to go down initially to $154 20/32 so fundamentals I’m not a huge fundamental guy. I’m more of a technician than I am fundamentals.
But if you don’t know how the bond market works this is a quick synopsis so I’m going to go to a monthly bond chart.
And then as you can see here. I’ll use a pen. As the interest rates drop this market will go up. Now, as interest rates start to rise in other words the interest rates go like this overtime then these things will go like this.
So it’s an inverse relationship. That’s all you have to remember. Now, it’s a little confusing if you look on the other side because sometimes they’re giving you the yield instead of just the outright contracts.
But just remember as interest rates go higher the bond market should go lower. As interest rates go lower the bond rate will go higher.
Now, if you’re like everybody else you’re like dear goodness how much lower can interest rates go. I mean they can potentially go negative. In a couple of countries they went negative.
I don’t think we’re going to get there but you could so with that being said let me get off the ink there and let’s go take a look at some of the contract specs.
So for this example this is the 30-year bond and as you can see in this there are 10 contracts trade. The reason I know that is because it’s $312.50.
So on this particular trade if you would have risk a maximum of $3,750 you could have been up as of Friday, up $11,562.50 and you had a maximum unrealized profit of $15,312.50.
Now, you’ve been going how much this cost of trade 10 contracts? More than it cost a trade one obviously. It depends on your broker.
There’s a minimum intraday margins and overnight margins and you’re just going to do a little bit of a homework to see what your broker puts the mininum on you.
Now, if you’re trading one contract. Here’s how you would do this math. So you would say that you were short at $164 11/32 and you use the stop of 23 so I’m going to whip off my phone and do it so I don’t do any mistake.
I’m going to go. It’s going to be 23 minus 12 so is 11 ticks so 11 transactions. Now, this thing is worth $31.25 per tick per transactions.
So you go times 31.25 so you’re risking on this if you just trade it at one contract you’d be risking $343.75 to have potentially if you close it at right now you would have been up basically $1156.
If you would have got out the dead bottom of the day which is damn you’re impossible nobody can do that stuff which is kind of fairytale stuff. You would have made $1531 so not too bad. That’s how that stuff works.
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Now, it’s obviously let’s talk about going to be about him because he was a past hedge fund manager and he’s a current hedge fund manager. And he’s now telling his friends and family you might want to exit stocks and here’s why.
So you might want to come out and checkout his webinar on Tuesday, February 23rd at 8PM EST.
Good luck. Hope it helps. See you on the next video.
Hubert.
