ZN ZB and NOB spread

Discussion in 'Financial Futures' started by londonkid, May 8, 2013.

  1. Considering the tick prices 7.8125,15.625,31.25 of ZF,ZN,ZB
    One tick move in ANY of the instruments would result in 31.25 move in the fly's pnl only if the fly was 4ZF -2ZN 1ZB but it's not the case.

    I guess in general case (when tick sizes of individual instruments don't align well with any useful ratios) one just doesnt' think of pnl in terms of ticks...

    How do you chat it? As 15*zf-20*zn+6*zb?
    #51     Jan 31, 2014
  2. well you take into account that the fy moves in 1/4 tics, the ty moves in 1/2 tics and the zb moves in full tics- since it is a butterfly and you have 2 of the "body" of the fly- if that moves 1 price it is double in terms of the position value. ie if the fy moves 1 price in a fy fly it is a .5 move in the value of the fly, the ty a 1 tic move and the zb a 2 tic move.

    -6 zb / +20 zn / -15 zf = long 20 ty fly

    so for the ty fly a 1 price move of the zb = .6 value change in the fly, zn 1 tic value, and fy .375
    #52     Jan 31, 2014
  3. bone

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    #53     Jan 31, 2014
  4. bone

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    #54     Mar 10, 2014
  5. i960


    Old thread but I figured I'd bump it since it seems to be relevant again and I like keeping related information in one place...

    So what's the hidden risk here (aside from a sudden policy move) on going long FYT, short NOB right now as +3zf,-5zn,+1zb? There's a clear trend in play for a few months now and rather than making a bet on general steepening (which doesn't seem to be happening yet in the long end), why not isolate 5s10s vs 10s30s? @sle @Martinghoul @Maverick74

    Chart_18-02-01_10-24-14.png Chart_18-02-01_10-39-49.png
    #55     Feb 1, 2018
  6. It's a little bit of a funny beast, this one...

    You're doing a 5-7-18 fly which, by virtue of being so asymmetric, will be driven mostly by the ZB leg (esp given your weights). It's not entirely clear what the view you're trying to express here is.
    #56     Feb 1, 2018
  7. i960


    I don't really have a "view" per se, I'm simply trying to hop on the trend that I see in front of me to be honest which could be roughly translated as "10s stronger relative to 5s or 30s". I have to presume atleast the yield based charts which I originally used aren't something I have to weight, right? I don't have a BB accessible but did some rough calculations just based on margins and it would seem that FYT/NOB is about 3/2 ratio so is 9zf,-12zn,2zb or 4zf,-6zn,1zb (instead of 3,-5,1) more appropriate? Would it be prudent to ditch the ZN/ZB side of things and instead go with FIX/NOL or is this thing just off the deep end? I tried to avoid the shorter end to have less sensitivity to interest rate risk.
    #57     Feb 1, 2018
  8. Bobbybax


    Bloomberg has it as 4ZF-5ZN+1ZB
    #58     Feb 2, 2018
    i960 likes this.
  9. Quiet1


    This page has the futures DV01s for this kind of trading. So Bobbybax has it right.
    #59     Feb 2, 2018
  10. Yeah, so even if you use the 50:50 weights (as suggested by Bobbybax), it's still a very asymmetric fly, which makes it a tough one. This is the long-term plot of the yield fly from BBG:

    This is what the yield fly looks like long-term: 5s7s18s.jpg
    I would find it difficult, here and now, to join the trend and be short ZN in that fly, given just how historically extreme it looks.
    #60     Feb 2, 2018
    jtrader33 likes this.