What kind of leverage can you get trading bonds?

Discussion in 'Prop Firms' started by microjohn, Jan 28, 2006.

  1. And what is the cost of the leverage?

    I know all about equities and futures, but not bonds.
  2. Why not trade bond futures. I know the 10-year note future has an underlying of about $110,000 and an initial overnight margin of about $1,000. That's some pretty good leverage!
  3. Cash haircut on treasury debt is typically 1% with corps up to 5%. Obviously this isn't available to the retail participant. The vig is variable.
  4. cstu


    Why not figure out a market you know and then trade that?
  5. CBOT 10y futures with 100k notional and approx 90:1 gearing based upon initial margin.
  6. what advantage is margin when the underlying moves less than other markets? You need to compare daily ranges with margin to see where you get the most bang. Still though, I would recommend not trading at more than 5 to 1 regardless of exchange requirements ie 1 10 yr contract per 20,000 equity
  7. Statistical vols in the 10s are >6% at 90:1. The only US exchange traded paper-asset with greater available leverage is the CME FX contracts; specifically the EuroFX future at 107:1 haircut at 8% stat vol. The yen may carry a slightly lower haircut.

    The SGX Nikkei contract carries a very low haircut a well. These contracts are definitely on the top-10 worldwide. More than enough leverage to get someone in serious trouble.
  8. Thanks for the info. How about Eurodollar and Euribor futures?
  9. Disregard exchange minimums and use your own . It's all a part of sound money management
  10. EDs carry lower haircuts, but the stat vols are in the 4% range. Another highly leveraged contract. I don't follow the Euribors.
    #10     Jan 29, 2006