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ProShares Short 20+ Year Treasu Message Board

  • chall12180 chall12180 Apr 24, 2010 2:31 PM Flag

    Decay

    I believe that US Treasuries are over-valued, and interest rates will rise. I want to short treasuries. Is there a way to do this without buying an asset with "decay"? There is decay in TBF right? I am confident in the call, but not the timing. If I am early, I don't want to see my investment decay away.

    Are there any options?

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    • I have the same question but could not find anything. Decay is driven by short a bond which actually pay a coupon. I am actually short TLT, which is the same, but have to pay every month the interst those bonds yield. So net, it cost me 4.5% of the investment to stay short 30 year bonds, still a better deal than long this ETF.

    • I have the same question but could not find anything. Decay is driven by short a bond which actually pay a coupon. I am actually short TLT, which is the same, but have to pay every month the interst those bonds yield. So net, it cost me 4.5% of the investment to stay short 30 year bonds, still a better deal than long this ETF.

    • You can go into the futures markets unleveraged! No decay, no problems.

      If you use TBF, you can counteract the cost of decay with options. Simply write out of the money calls.

    • If you think you are early, get a 3 month chart. If anything, you are "short-term" late, but its still a good entry point, to protect your account balance. Bonds will go lower.

    • If you think you are early, get a month chart. If anything, you are "short-term" late, but its still a good entry point, to protect your account balance. Bonds will go lower.

    • after holding a position for over, a year (and adding to it at various points) it has become obvious that there is a lot of decay in TBF. not as much as TBT, of course, but enough to ruin it as anything more than a short-term timing trade. chart the long-bond versus TBF and you see a change of -6% for the 30-year bond and -14% for TBF. with the spike in rates, i'm bailing on this ETF. wish there was another alternative, as shorting long bonds is basically like printing money, but TBF is not a great way to play this obvious trade.

      • 2 Replies to quill_bear
      • quill_bear,
        Do you have ANY idea what you are doing at all? No offense, man, but your actions have been exactly the OPPOSITE of what this ETF demands. With the fed keeping rates low - to the point of monetizing the debt why would you want to hold TBF for the past year?! Of COURSE your holdings will get eaten away by fund expenses. NOW is the time to buy TBF. Even though the economy is only starting to limp into recovery, rates will start to rise and TBF will rise with it. Also, the stealth inflation of rising prices in food and energy becomes more evident every day.
        I have had a significant holding in gold over the past few years, but with the recent weakness have started lightening up and moving into TBF instead.
        Good luck to you.

      • Even at that decay rate the borrowing costs for a little guy like me to short treasuries more directly are about the same. I traded TBT when I first bought on the spike in Dec 08 until that March. Haven't touched it since and don't know why anyone would... But got back into this last December and think it goes close to 50 sometime this year. I wish I could find a cheaper way to short the 30 yr treasuries, and if anyone knows I'm all ears, but I think I'm sticking with this for now.

    • it does not seem to have much decay when you chart TBF along with the 20year treasury rate index.

    • TBF is unleveraged, so it has little to no decay. The ETFs that have decay, are the leveraged ones (2X or 3X). TBT is 2X leveraged, and its decay is pretty bad. But not TBF.

 
TBF
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