short sale of bonds

Discussion in 'Retail Brokers' started by mbv, Dec 17, 2006.

  1. mbv


    Where does a retail trader go who wants to sell a bond short?
    And what are the margin requirements like?

  2. Any futures firm, margins are $1350/contract, with maint. margins at a $1000.

    On another note, why do you want to short them given the fact you seem to know nothing about them,or at least the futures anyway?
  3. mbv


    Oops. I want to know if it's possible to short individual corporate bonds.

    Now, I have never seen futures that let me do that. Do they exist (in the retail world)?

    As for 'why do you want to short them' ... I never said I wanted to short them. I said, where does a retail trader go who wants to...? Thanks.
  4. Its something I've been curious about too, and while I know nothing about this from a practical perspective, I bet buying credit default swaps would achieve exactly what you're looking for. CDS go up in value when the underlying bonds degrade in quality - think of it as puts on bonds.

    No experience, so you'll have to do a little homework to find where to buy these. here's a start:

    I assume they could connect you with retail brokers. post back here when you find someone who doesn't charge ridiculous commissions to trade these things.
  5. YOu need to have a prime brokarage account to buy/sell corporate bonds.
  6. ? what
  7. are corp bonds any liquid? never even thought of populate my grid on tws with a few of them...will check them tomorrow anyways but if anyone can give me some clues i would be really greatful.

  8. Bit - as a broker that used to sell them, I would say make sure you do your homework first. In other words, some are very, very liquid and others you will take a big hit trying to sell later. And you have to look at each individual issue, not just who is issuing them. Example - GMAC issued alot of bonds/notes when I was a broker. They were huge in the bond marketplace. But just b/c they were big does not mean that by default that every issue is liquid. I recall a client I had that needed to sell a note prematurely and just to get an offer we had to put an order out there and we waited for DAYS only to take a HUGE loss of principal. This was a GMAC note.

    So, watch who is issuing them and how big the issue is that you are buying into. The issue should be worth millions and millions of dollars - the more the better. It's not uncommon to see some issues at $50 million and higher. Those are easy to dump later if need be.

    Keep in mind that bonds are built to be held to maturity and collect the income while you hold it. They are not built to be actively traded - with the spreads and commissions - that is hard to do on the secondary market. My personal opinion is that if you want to trade bonds, look at the bond futures. If you want steady income, consider buying and holding a bond.

    As a side note, for those looking for income but hate paying taxes on it, look at municipal bonds.