Highlight on a Blog trade idea – USU Puts vs FVU Puts

Always love Alex Manzara’s blog, it’s a great source of ideas and interesting thoughts. An essential daily read.

This weekend he discussed the US 30-Yr (USU) versus US 5-Yr (FVU) which is very much on his radar as a trade, looking for curve steepening, so US 30-Yr (USU) to underperform US 5-Yr (FVU).

Chartpoint is expecting this trend to continue
The current Vol history looks very much favor as well, as you’re be looking to sell FV Puts

The suggested potential trade to look at would be buying USU 151 Puts versus FVU 116.75 Puts. Deltas are 18.7% and 19.5%. Vega 0.0042 and 0.0169. Vega weighting would be 0.0169/0.0042.

Trades showing the blotter.

Creating a Vega weighted structure you get USU 151 puts v 4 x FVU 116.75 Puts (Buying the USU 151 Put vs FVU 116.75 Puts). This can now be plotted synthetically, it closed at -0.049 last night, so trades at a small credit.

Trade in our Booking System. Another way would be to scale into this position, quarter here, then add the other 3 quarters as the market moves over the coming weeks.