Bonds in a long portfolio — the classic 60/40 ballast. Works beautifully when correlations behave. Breaks spectacularly when they don't.
Right now? I'm tactically short bonds through 9/30. Not a structural call. A setup call. Positioning is stretched, technicals are tired, and the path of least resistance near-term is lower prices.
But here's the trade: I'm layering in a max long position for alpha slightly above current levels. Not a simple buy. A structured options play that accounts for the vol implications of the CTD flip — the kind of thing that separates operators from headline traders.
Why options? Because outright duration here is expensive. You're paying for convexity you may not need and taking gamma risk you don't want. The CTD shift changes the vol surface. It changes how bonds respond to rate moves. It changes how you should position.
So instead of buying futures or cash bonds, I'm using a spread that isolates the move I want while managing the vol I don't. Long gamma near the strike zone. Short vega in the wings. Structured to benefit from mean reversion without getting crushed by time decay or a vol collapse.
And yes — people think I'm long because of that Economist cover. The one calling the top in rates. Classic contrarian signal, right?
Wrong.
I'm not long because of a magazine cover. I'm long because the technical setup, the sentiment extreme, and the macro backdrop have aligned. The cover is just noise. A meme. A post-hoc narrative that retail uses to justify trades they don't understand.
Real edge comes from knowing when to fade the crowd and when to fade the fade. Right now, everyone is positioned for higher rates forever. That's the consensus. That's the risk.
Bonds aren't a religion. They're a tool. Sometimes you use them for carry. Sometimes for convexity. Sometimes as a hedge. Right now, I'm using them for alpha in a specific window with a specific structure.
Short near-term. Long medium-term. Structured to win if I'm right and not die if I'm wrong. That's the game.
Right now? I'm tactically short bonds through 9/30. Not a structural call. A setup call. Positioning is stretched, technicals are tired, and the path of least resistance near-term is lower prices.
But here's the trade: I'm layering in a max long position for alpha slightly above current levels. Not a simple buy. A structured options play that accounts for the vol implications of the CTD flip — the kind of thing that separates operators from headline traders.
Why options? Because outright duration here is expensive. You're paying for convexity you may not need and taking gamma risk you don't want. The CTD shift changes the vol surface. It changes how bonds respond to rate moves. It changes how you should position.
So instead of buying futures or cash bonds, I'm using a spread that isolates the move I want while managing the vol I don't. Long gamma near the strike zone. Short vega in the wings. Structured to benefit from mean reversion without getting crushed by time decay or a vol collapse.
And yes — people think I'm long because of that Economist cover. The one calling the top in rates. Classic contrarian signal, right?
Wrong.
I'm not long because of a magazine cover. I'm long because the technical setup, the sentiment extreme, and the macro backdrop have aligned. The cover is just noise. A meme. A post-hoc narrative that retail uses to justify trades they don't understand.
Real edge comes from knowing when to fade the crowd and when to fade the fade. Right now, everyone is positioned for higher rates forever. That's the consensus. That's the risk.
Bonds aren't a religion. They're a tool. Sometimes you use them for carry. Sometimes for convexity. Sometimes as a hedge. Right now, I'm using them for alpha in a specific window with a specific structure.
Short near-term. Long medium-term. Structured to win if I'm right and not die if I'm wrong. That's the game.