Below is an illustration trading futures options on 30 year bond (ZB). Our post shows bullish and bearish positions using a combination of call and put options.
Trade Options on Futures
30 Year Bond (ZB) * Directional & Neutral Positions
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Volatility
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Options fall into the category of being slightly overvalued in volatile markets in the weekly options report.
Notes:
Contract Size - Points ($1,000) and 1/32 of a point. For example, 134-16 represents 134 16/32.
Tick Size: 1/64 of a point ($15.625/contract), rounded up to the nearest cent/contract.
Trading Hours: CME Globex: Sunday - Friday 5:00 p.m. - 4:00 p.m. Eastern Time (CST).
* Tip: Par is on the basis of 100 points. For cabinet transactions only, minimum tick sizes range from $1.00 to $15.00, in $1.00 increments per option contract..
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30 Year Bonds
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Strategies
Below is the starting position for an strangle swaps. It allows for time to adjust the spread structure if necessary as price moves within a reasonable range of daily volatility. For example, monitoring the position at T+0, if prices approached extremes in range, the strategy could be re-adjusted to neutralize delta or become directional.
Following is a broken wing iron condor. Main difference between the 2 depends on your perspective for implied volatility. As price moves towards the end of ranges, a decision can be made to adjust, hold or exit the spread.
The % yield shown in the diagrams below represent an estimated return on margin from projected dates shown below. The structure has positive time decay which is an advantage over holding outright options.
Iron Condor
Below is a delta neutral structure that is relatively directionless. The iron condor has positive time decay and will earn within a range over the next 2 weeks.
ButterFly
Below is a butterfly spread pushed further to the dowside with a directional bias over time. It has some cushion on price movement higher and earns positive time decay.
Below is a bullish version of above supposing prices continue trending higher
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