ZB Futures - How to Trade in Bond Futures

What Is the ZB in Trading?

Simply put, the ZB, also known as the ‘T-bond,’ is a long-term, 30-year U.S. Treasury bond. The U.S. Treasury usually borrows money by issuing bonds and notes for a fixed term, such as 2-, 5-, 10-, and 30-year terms at a fixed interest rate.

Traditionally, these bonds were determined by the prevailing market rates at the time of the issuance of the bond. The ZB offers a different trading perspective compared to other indices. It is usually sensitive to major economic reports, and specific changes typically result in fluctuations in trading.

Bond prices are directly affected when interest rates fluctuate, which can affect the equity, forex, and commodities markets. The relationship between interest rates and bond prices is inverse. When rates or yields rise, bond prices fall.

Bonds consist of: face value (payout value), interest rate (coupon), and a maturity date. Should the interest rates increase, that means people are less willing to invest in a fixed-rate bond, and so its prices automatically go down.

Why Should You Invest in ZB Invest Investment Funds?

As discussed, the T-bond or ZB is a particularly attractive investment option because it offers the possibility for an investor to spread his risk over a long time. It is a highly liquid, standardized, and transparent investment tool.

Liquidity is one of its most attractive prospects. Because there are always many willing buyers and sellers, you can commit or free up your investment fund as need dictates. It is essential that you understand the specs of a ZB to understand just how it trades in the market.

According to the CME, ZB specs include:

Face value: USD 100,000
Point value: full point = $1,000
Deliverable maturities: 25-30 years
Margin requirements: $2,500 initial and $2,350 for maintenance
Minimum Tick value= $31.25
Contract months: Quarterly-March, June, September, and December
Trading hours: electronic 5.00 PM (previous day) to 4.00 PM Central Time
Last day of trading and delivery: last day of trading is the day before the last seven (7) days of the contract month. Delivery is physical and can be done on any day of the contract month.

One of the advantages of investing in ZB is that bond prices can fluctuate significantly, allowing the traders to earn significant profits. At the onset, traders only have to put up a small percentage of the total futures contract’s value. ZB also allows traders to speculate on a bond’s price movement for a future settlement date.

What Are Bond Futures?

Two parties agree that one party will purchase a specific asset at an agreed-upon price on a predetermined date in the future. On the day of the contract conclusion, the seller is obligated to deliver the agreed-upon asset to the buyer. This asset can be a commodity or a financial instrument such as a bond.

A bond futures contract is bought and sold through a brokerage firm that is licensed to trade in the futures market. Bond futures are contracts in which the underpinned asset is a Treasury bond. Treasury bonds are sold daily in a highly standardized futures market. Bond futures prices experience constant fluctuations because of their high trade turn volumes.

Bond futures can be used either as a speculative investment or for hedging. Hedging is the practice of purchasing products that can offer protection to holdings. It is a form of cushioning for the investor from market volatility. Speculation is investing in products that have a high-risk, high-reward profile. It is important to consult an investment advisor before engaging in speculative investments.

Are Investment Funds Safe?

All investments inherently carry a form of risk. However, some risks are easier to mitigate. Consider when you buy individual stocks from a single company, you alone bear the risk or reward factor for that investment. Should the company go bust, you shoulder the loss by yourself. Should it succeed, the profit reward is also solely yours to enjoy.

Now consider pooling your money into a fund alongside other like-minded investors. You will diversify your stock portfolio and spread your risk. You also have the benefit of having a fund manager whose sole goal is to keep making money for his clients and guaranteed dividends.

It is relatively safer to put your money in an investment fund as opposed to solo investments. We highly recommend that long-term investors build solid investment portfolios.

How Can Targets Trading Pro Help?

It is vital to consider several factors to maximize your returns when trading the 30-year U.S. Treasury bond. Some of these factors are:

Interest rates
Inflationary prospects
U.S. dollar prices
U.S. monetary and fiscal policy

Trading futures becomes a challenge because of the on-the-spot decisions you will have to make and other challenges you encounter while doing the actual trading. That is where Targets Trading Pro comes in.

Targets Trading Pro is an automated trading robot program that assesses entry prices and executes them based on trends. It also determines optimal stops and targets and places those values in your trade structure. Click here to start your one-week trial!

Risk Disclosure

The risk of loss in trading futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or to authorize someone else to trade for you, you should be aware of the following:

If you purchase or sell a futures contract, you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. Thus, trading of futures may not be suitable for everyone and may involve the risk of losing part of your money, all of your money, or even more than all of your money.

The placement of contingent orders by you or by your broker, such as a “stop loss” or “stop limit” order will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.the high degree of leverage that is often obtainable in futures trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

Futures prices can be highly volatile and unpredictable. Price movements of futures contracts can be influenced by political, economic and many other factors which are outside of a trading system’s or your broker’s control. No assurance is given that a customer will not incur substantial losses. Futures trading is highly leveraged. The low margin deposits normally required in futures trading permit an extremely high degree of leverage. Accordingly, a relatively small price movement in a futures contract may result in immediate and substantial loss to an investor. Like other leveraged investments, futures transactions may result in losses in excess of the amount of money invested.

Our trading systems are dependent to a significant degree on the proper functioning of the computer systems used to generate trading signals. Accordingly, systems failures, whether due to third party failures upon which such systems are dependent or the failure of the broker’s hardware or software, could disrupt trading or make trading impossible until such failure is remedied. Any such failure, and consequential inability to trade (even for a short time), could, in certain market conditions, cause a client’s account to experience significant trading losses or to miss opportunities for profitable trading.

The trading systems offered here are highly technical. The profitability of trading under these systems depends on, among other things, the occurrence of significant price trends which are sustained movements, up or down, in futures prices. Such trends may not develop; there have been periods in the past without price trends. No assurance can be given that these methods will be successful in the future, or that investment results will be similar to those achieved or illustrated in the past. Although every attempt is made to ensure the accuracy of illustrated results of our trading system, we cannot guarantee such, due to inaccuracies and fluctuations in data or errors in calculation. There are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. Another one of the limitations of hypothetical trading is that such trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading.

Prior to buying or selling a futures contract, an investor will need a broker, and you must meet suitability requirements in order to trade these specific instruments. By accepting this disclaimer you are acknowledging the risks involved in trading the futures markets and are also acknowledging that you, the subscriber, and not trb futures llc, are solely responsible for any losses, financial or otherwise, as a result of using our trading systems. Trb futures llc shall under no circumstances be liable for any lost profits, lost opportunities, misstatements, or errors contained within these pages. You also agree that trb futures llc will not be held liable for data accuracy, server problems, or any special or consequential damages that result from the use of, or the inability to use, any or all of the materials published on our website. You agree to hold trb futures llc harmless for any act resulting directly or indirectly from this site, its data, content, materials, associated pages and documents. You agree to defend, indemnify and hold us and our affiliates harmless from any and all claims, liabilities, costs and expenses arising in any way from your use of any services provided by trb futures llc. Trb futures llc provides the information, services and products on this website “as is” without warranties of any kind. In no event shall trb futures llc, its managers, agents and employees be liable for any loss or injury, direct or indirect, incidental, consequential, special or exemplary damages, or any damages whatsoever arising from the use or performance of this website or from any information, services or products provided through this website.

Hypothetical Performance Disclosure

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ZB Futures – How to Trade in Bond Futures