Bund Bobl Schatz Fly

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Old Sep 20, 2009, 2:34pm   #1
 
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Bund Bobl Schatz Fly

Hi there,

Is there anyone kind enough that would be willing to spend a few minutes explaining the basics for me regarding the bund-bobl-schatz butterfly? Ive just started trading and so far its been going ok. My initial overall feeling regarding the fly is that it is very hard to estimate where its gonna go next and what drives it either up or down. Im basically waiting for it to go 10-15 ticks one way and then get in and "hope for the best"/that it will come back to where it was so I can make a few ticks on its return.
My initial questions are if there is anyone out there with experience of the fly that in fairly simple language could explain what I should be looking or watch out for, that indicates where the fly will go. Simply put, what makes it go up and what makes it go down?

Thanks a lot!

/Novish
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Old Sep 23, 2009, 8:05pm   #2
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Originally Posted by novish View Post
Hi there,

Is there anyone kind enough that would be willing to spend a few minutes explaining the basics for me regarding the bund-bobl-schatz butterfly? Ive just started trading and so far its been going ok. My initial overall feeling regarding the fly is that it is very hard to estimate where its gonna go next and what drives it either up or down. Im basically waiting for it to go 10-15 ticks one way and then get in and "hope for the best"/that it will come back to where it was so I can make a few ticks on its return.
My initial questions are if there is anyone out there with experience of the fly that in fairly simple language could explain what I should be looking or watch out for, that indicates where the fly will go. Simply put, what makes it go up and what makes it go down?

Thanks a lot!

/Novish
basically you're trading the entire range of bond yields (in terms of time to maturity),
first, understand the basic technicalities, when yields go down accross the board, the spreads/fly will be cheaper (because there's a theoretical minimum to the yield, all ranges converge. when yields go up, the spreads/fly opens up.

now, ask yourself why would yields should/would go down/up?
inflation? ECB interest rate decisions? whole lot of other macro economic data bits?
again, basically, when inflation rises, that usually means interest rate hikes and therefore the fly should open. and vice versa.

that was a little about the fundamentals.
personally, I don't trade like that.
what you're doing is gambling, no matter what you do - you gotta have a system.
you've got to test it, and only then trade it.
you have to have proper money management.

remember, you're a trader, not an analyst. you're in it for the cash. you have to do what you have to do.

Good Luck
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Old Sep 26, 2009, 9:38am   #3
 
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novish started this thread Thanks a lot for this!
I totally agree with your statement, that Im "gambling". Youre a hundered percent correct, and in order to be able to change that I need some fundamental knowledge in place in order to be able to build a system/strategy to use and follow when I trade.
Your input is of much value and Im very greatful for your time.
Quick follow up question, when your refer to the fly "opening up" you mean goes down right?
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Old Sep 26, 2009, 11:31am   #4
 
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Incidentally why are you trading the fly? Are you being made to as part of some course?
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Old Sep 26, 2009, 7:25pm   #5
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Thanks a lot for this!
Quick follow up question, when your refer to the fly "opening up" you mean goes down right?

opening up means that the longer terms (bobl too but moreso the bund) prices goes down (yield go up) and the curve steepens. the price of the fly tends to be higher.
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Old Oct 5, 2009, 10:01am   #6
 
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novish started this thread Thank you very much for explaining this to me! Very helpful. and yes, I am trading the fly as part of a course.
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Old Oct 16, 2009, 11:08pm   #7
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I know a few guys who are trading the fly now who say it is providing more opportunities so good luck novish.
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Old Oct 17, 2009, 8:39pm   #8
 
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novish started this thread Agree, the fly has been pretty stabile lately with a solid and fairly predictable 20 tick/day range. So all good and no complaints!
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