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Nick:
Well, it certainly is not as cheap as it was weeks ago. But we'll only know if
it's too expensive in hindsight, won't we. I don't make predictions and I didn't
advise anyone to take a trade in the TED spread--nor did I advise them to pass
on the trade. It's an oldie but a goodie, and the difficulty with any trade in a
market you haven't watched for extended periods of time is the lack of
familiarity. As I said, I'd advise anyone that thought the trade was intriguing
to spend time charting it and forming an opinion. For what it's worth, its
current level is relatively cheap to the levels it has traded in times of
extreme volatility.
Only time will tell where any of these markets will go..
Is there a reason for your opinion on this spread? I'd like to hear it.
Best,
Tim Morge
nickclavett@xxxxxxxxx wrote:
>
> the music is out of this trade -
> don't put it on now
>
> ---- On Oct 8 Timothy Morge <tmorge@xxxxxxxxxxxxxxx> wrote:
> > Folks:
> >
> > I tried to post this Wednesday around noon, but my phone lines have been out.
> > Hopefully, it is still timely.
> >
> > We have been talking about spread positions and one that is particularly useful
> > in volatile situations like this is the T-ED futures spread [Ted spread]. This
> > spread was a very popular spread until the early 1990's, but has really been an
> > orphan child until this year. People buy T-Bill futures and sell eurodollar
> > futures as a spread when they are concerned about credit issues and country
> > risk. I recommended people look at yield curve steepening trades late last week
> > and again on Monday, and in some ways, this is the ultimate steepening trade.
> > This trade is today's version of the period in the depression when people paid
> > the Swiss government and the US government to hold their money! Yes, we've had
> > negative interest rates.
> >
> > Like all spreads, don't just jump into the trade. Look at a chart and be certain
> > the level of the trade entry makes some sense. As of this afternoon [Thursday],
> > I haven't gotten data yet to see where the TED spread is at, but eyeballing the
> > prices of Dec T-Bill futures [ended up 16] and Dec euros [ended down 4], there
> > were lots of these types of spreads being put on. This spread is one of many
> > that younger traders may not have seen first hand, and so many may overlook it.
> >
> > Best,
> >
> > Tim Morge
> >
>
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