Bund Bobl Schatz Fly

novish

Newbie
9 0
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
 

amnonco

Active member
175 8
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
 

novish

Newbie
9 0
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?
 

amnonco

Active member
175 8
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.
 

novish

Newbie
9 0
Thank you very much for explaining this to me! Very helpful. and yes, I am trading the fly as part of a course.
 

amit.s

Junior member
11 0
I know a few guys who are trading the fly now who say it is providing more opportunities so good luck novish.
 

novish

Newbie
9 0
Agree, the fly has been pretty stabile lately with a solid and fairly predictable 20 tick/day range. So all good and no complaints!
 

Martinghoul

Senior member
2,690 276
Of course there is... TU/FV/TY, aka ZT/ZF/ZN
 

amnonco

Active member
175 8
no, us 2 5 and 10 paper doesn't exist
ahhh....yes they do exist...
as martingoul stated...

there isn't a tradable readymade fly, but you can construct with (to buy 1 fly) buying 1 contract of TU (2 years) selling 2 contracts of FV (5 years) and buying 1 contract of TY (10 years)....it's exactly the same as bund bobl schatz - just for the US
 

Aston1st

Active member
237 22
The fly has been trendnig downward since Non-Farm Payroll last month. Any ideas ?

Back in September it sort of peaked at 208.10 something, now it's trading at 207.28 or something!