Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

How to Profit From Front-Running the Government Bond Auctions

Interest-Rates / US Bonds Jun 15, 2009 - 03:13 PM GMT

By: DailyWealth

Interest-Rates Best Financial Markets Analysis ArticleTom Dyson writes: Front-running is illegal.

Here's how it works: A crooked broker receives a large order from a customer. Before he executes the customer's order, he'll buy the stock in his own account. The customer's order pushes the price of the stock up and gives him an easy profit.



Today, I'm going to show you how to "front-run" the U.S. government. This trade is not illegal. The information we'll use is public, not "inside" information. But the profits are just as easy... As I showed you in an essay last week, the Treasury sells around $165 billion bonds each month to pay for the government's spending plans. It auctions these bonds on Tuesdays, Wednesdays, and Thursdays in the second and fourth weeks of the month. In that essay, I showed you how to trade these auctions each month. Today, I've got a slightly different twist, which I think will end up being more profitable...

To make money, all you have to do is front-run the Treasury's sales of bonds. In other words, you sell short bonds just before the auctions begin on Tuesday, and then cover your short after the last auction on Thursday. Repeat every two weeks.

Normally, strategies like this don't work in the financial markets. Traders mark down prices in advance of the auctions, so there's no benefit to front-runners. But in this case, my guess is, the Treasury's auctions are so large, they are bludgeoning the market lower, despite the traders' moves.

Take the most recent "front-running" trade as an example. Between Tuesday, June 9, and Thursday, June 11, the Treasury auctioned $65 billion in three-year, 10-year, and 30-year bonds.

The UltraShort 20+ Year Treasury ProShares (TBT) is the ETF that rises when bonds fall in price. It opened at $56.58 on the morning of the first auction and closed at $57.72 the evening of the last auction. Government front-runners made 2% in three days.

You could have put on this trade 12 times in the past six months, and you would have profited eight times... with an average gain of 1.8% per trade and an average three-day holding period.

Front-Running the Government
Entry Date
Entry Price
Exit Date
Exit Price
Gain
Days Held
Dec 22, 08
$36.23
Dec 23, 08
$36.62
1.1%
2
Jan 6, 09
$42.61
Jan 8, 09
$41.73
-2.1%
3
Jan 26, 09
$45.01
Jan 29, 09
$47.79
6.2%
4
Feb 10, 09
$47.10
Feb 12, 09
$45.96
-2.4%
3
Feb 24, 09
$45.00
Feb 26, 09
$47.62
5.8%
3
Mar 10, 09
$46.85
Mar 12, 09
$46.19
-1.4%
3
Mar 24, 09
$46.47
Mar 26, 09
$45.20
-2.7%
3
Apr 7, 09
$45.73
Apr 9, 09
$45.75
0.0%
3
Apr 27, 09
$46.71
Apr 29, 09
$48.90
4.7%
3
May 5, 09
$49.75
May 7, 09
$52.41
5.3%
3
May 26, 09
$53.08
May 28, 09
$55.77
5.1%
3
Jun 9, 09
$56.58
Jun 11, 09
$57.72
2.0%
3
   
Average Gain
1.8%  
Buy TBT at the open price on Tuesday and sell at the closing price on Thursday, auction weeks only.

It may not sound like much, but compounding your money at 1.8% every two weeks turns every $1,000 you invest into $1,530 in one year. That's a 50% gain with just a handful of tiny trades. And with leverage, the gains would be even greater.

This week, there are no Treasury auctions... and TBT is falling. The next auctions are next week, starting Tuesday. To front-run the government, buy TBT first thing on Tuesday morning June 23 and then cover your position late on Thursday evening. Repeat every two weeks.

Good investing,

Tom

P.S. Click here for a link to the schedule of government bond auctions.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2009 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules