Trade Credit Default Swaps?

comintel · Jul 16, 2008

Does anyone know of a way to trade credit default swaps as a small trader?

robbie380 · Jul 16, 2008

you can't as a small trader. there is no single exchange for them.

psytrade · Jul 16, 2008

with $10 million in spare capital you could.

Use Markit data.

comintel · Jul 16, 2008

Quote from psytrade:

with $10 million in spare capital you could.

Use Markit data.
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Thanks I do not have that much right now but I appreciate it.......

psytrade · Jul 16, 2008

Quote from comintel:

Thanks I do not have that much right now but I appreciate it.......
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Either do I !

sjfan · Jul 17, 2008

Quote from psytrade:

with $10 million in spare capital you could.

Use Markit data.
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Good luck with that... I believe there has only been on non-institutional trade in CDS ever - it was done after months of paper work (the guy who wanted to trade had several hundred million in liquid assets)....

MarkIt data costs about 100k+ a year

makloda · Jul 17, 2008

From realmoney.com

An easy way for investors to profit from widened spreads is to short Primus Guaranty (PRS;NYSE), which sells credit default swaps on single-name corporate bonds. The company must mark its investment book to market each quarter, and now has negative book value because of massive writedowns over the past year.

The stock mostly trades in-line with credit default swaps, which can be measured using the CDX indices from Markit.com. When spreads fall, Primus' stock rallies. But when spreads increase, the stock falls. Since mid-March, the stock has rallied as spreads on investment-grade CDS fell.
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comintel · Jul 17, 2008

Thanks I like it!

Unfortunately I guess there are no options on Primus Guaranty and it has already come down a long way......

Quote from makloda:

From realmoney.com:

An easy way for investors to profit from widened spreads is to short Primus Guaranty (PRS;NYSE), which sells credit default swaps on single-name corporate bonds. The company must mark its investment book to market each quarter, and now has negative book value because of massive writedowns over the past year.

The stock mostly trades in-line with credit default swaps, which can be measured using the CDX indices from Markit.com. When spreads fall, Primus' stock rallies. But when spreads increase, the stock falls. Since mid-March, the stock has rallied as spreads on investment-grade CDS fell.

More...