Hi there,
As many of you I have my core strategy covered with the VT and part VWRL (as left over from pre-IB times) as Satellit Investments I have some stocks, crypto and some left overs of P2P (lend.ch). From time to time I did some fun trading with mini futures and KO-warrants.
With the current market I would like to do some gambling again to benefit from the downward trend. While shorting a specific stock or index is always risky I feel really confident that bonds should go down with the increase of yields from FED. Does anybody know how to best use this situation to benefit from falling bond prices? I have checked out a short ETF SHV but there is no gain YTD which I do not really understand.
Markets already price in notable rate hikes in bond prices. Eg in CH 2-year swap rates (1%) as of today price an immediate rate hike of 1.7% (SARON = -0.7%). That’s enormous, you would only benefit if rates increase by even more than the market expects! Just look around the other countries and its even more extreme: Italy 10-year rate already stands above 4%. Up by more than 3% in 1 year so that a 10-year duration bond already (!) lost ~30%.
The ETF you mention seems to purchase short maturity bonds, rather than being short in bonds. Search for inverse bond ETF instead or even much more risky short futures if you really wish. It’s pure speculation though and you can equally lose large amounts especially with futures (your entire equity may be lost!)… Personally would not do this at all.
Thanks for your response. It sounds rather complicated indeed. I guess there is not sufficient value for me to dig in depth into this topic. I’m fine if I can do a small ride on the roller coaster with some mini futures (maybe on Nasdaq it’s still below all the EMA trend lines). I just like the idea of being able to have some gains even with a falling market. In an ideal world I would get some profit from the mini futures and investment that money into VT once it’s in a lower level. However, most likely what will happens is that I get knocked out and will buy VT afterwards with less money on a higher price
As I mentioned, that’s entirely different (short term vs. 10y rate).
See the AAA yield curve: Euro area yield curves (Germany is AAA). It’s negative until 8 months.
If you weren’t trying to make a misleading point on purpose, I’d recommend following a few financial classes, because I’m far from an expert but that sounds pretty basic (or maybe you’re just having fun with play money).
Be aware that your margin rate at IB is not fixed for the duration of your bet. It will go up when the rates rise. Like it did e.g. for USD from 1.58% to 2.33% in the last ~6 months.
Other participants can’t either. It’s not enough for rates to go up, they need to do so more than expected by other market participants. They’ve been wrong a lot, lately, but chances are they’ll start being right before rates reach their actual top.
I’m not saying not to do it but rather to stay tuned to the market sentiment and also stay very humble. People’s beliefs and psychology is very hard to catch and the composition of the market changes with time.
Well I made some little money. I closed the position above and and shorted for a time some US ETF short after my post. Less volatility more liquidity and with interest on USD balance it was totally worth it.
I closed the position at the beginning of the year.
You are totally right. I did also some EUR shorting expecting some big inflow in EUR this year it was a very bad deal in the end.
Finally I made no money with my trading just loosing my time watching my portfolio but it just teached me to stay 100% Passive: my new strategy is 75% VT 20% CHSPI 5% SMIM
3A 100% ZKB Mid-Small CH on Finpension
Big LSI + DCA and watch every quarter. Uninstalled IB app a month ago!
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