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# CBOT 2s/5s/10s fly

Discussion in 'Financial Futures' started by Ye Olde Refco, Sep 30, 2009.

1. ### Ye Olde Refco

Anybody know the 2s/5s/10s fly price/leg ratios?

I've seen the one that NAVEEVIa kindly put up, but I was wondering if any one had any other suggestions.

I've tried adding the 2's/5s with the 5's/10's but feel as though this is wrong.

All suggestions welcome!!!

2. ### atticus

Don't trade the yield curve w/o doing your own calculation of PV01 equality on the fly legs. IOW, don't use an arbitrary ratio.

4. ### Ye Olde Refco

Cheers Atticus, this is exactly what i'm looking for. But I have no idea as to how to calculate the PV01 equality on the fly legs. Could you help shed some light on this for me.

Cheers

5. ### Martinghoul

Using Z9 contracts at curr mkt prices:
1000 2y contracts = 861 5y contracts = 598 10y contracts.

You know what to do with these to do a fly.

The calculation of instantaneous DV01 (assuming a constant CTD) is quite simple. I think there was a thread somewhere here where I attached some slides from Eurex about the calculation of contract DV01s.

7. ### black diamond

I have also seen this done w/ linear regression weights instead of theoretical DV01s.

I haven't traded either so I can't say which is better for sure but regression weighing seems more logical to me. DV01 weighting assumes a parallel shift in the curve. Regression weights take into consideration the different volatilies along the curve and recent correlations.

But if you are trading a small number of contracts it might be the same answer anyway.

8. ### Ye Olde Refco

Thanks for all of the suggestions so far. I have been quickly enlightened.

Still, I have the problem of charting the fly on CQG. Does anyone have any good suggestions on how to translate the fly on to the chart?

9. ### Martinghoul

There's a whole variety of ways to approach this. Tuckman suggests a few different methodologies, but it's by far not an exhaustive list.

Problem with regression-weighted flies is, as usual, the choice of the sampling period and the stability of your coefficients.

10. ### TsunTzu

#10     Oct 5, 2009
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