I have been touting the short side of Eurodollars for some time now. Basically, as real interest rates move up, Eurodollar futures move down. I have suggested futures and lost about $400 a few weeks ago and have also recommended options on a few occasions. I want to keep this ongoing strategy of selling short futures and also buying put options. Despite Nostradamus Bernanke's absurd announcement that rates would stay low this past Tuesday until 2013 (hmmmm, any significance to that 2013 there, seems we hear a lot about all these good things that will happen.... in 2013) Anyway, his comments drove the December 2012 Eurodollar futures immediately from 9930 to 9957 where they have stopped cold. 9957 equates to a .043 rate and a look at the charts below will tell you that this market can move down hard at any time. The December 2012 futures look to hold below the 9960 - 9965 level so a short future at 9957, the current price seems like a nice short sale for the small $875 margin. As recently as mid April this contract was below 9800. Each point for Eurodollars equals a $25 move. Additionally, the 9850 Puts for the December 2012 can be had for about $200- $225. Those have a delta of 33% which means the option will move roughly 1/3 of what the futures moves. So effectively you can have the equivalent of a futures contract for roughly $600- $675 if you bought 3 options as they should move the same as one future and then you would not have to deal with futures or margins and the total risk is limited to the amount you pay for the puts.
The Trade: Sell December 2012 Eurodollar Future at Market (9957 last) Hold for long term
The Trade: Buy December 2012 Eurodollar Puts for 9 points ($225 ) or better