Roll down and Carry for 2/5

Discussion in 'Financial Futures' started by Cyrix, Feb 18, 2011.

  1. Cyrix



    I am trying to get a simple formula to calculate a ballpark cost for a 2/5 flattener. Could you guys take a quick look to see if this is ok?

    My formula is

    Roll down = 4*(5yield-4yield) – (5/2)*1*(2yield-1yield)
    Carry = 5yield-(5/2)*2yield

    [5yield means 5 year treasury yield and same for others]

    Then I sum up the two. I just need to get an approximate number assuming YC doesn't change for a year. Are the formulas correct?
  2. No... I responded to you on the other forum.
  3. Cyrix


    Just as an update for those who replied here and Wilmott, especial thanks to Martinghaul.

    I would like to close this 2/5 flattener trade and I am opening a 10/30 flattener.
  4. Yep, makes a lot of sense...
  5. I hope you managed to get some on, Cyrix...
  6. Cyrix


    The level is so compelling that I actually went straight to shorting TMF.