Today's uncertain economic environment presents fixed income asset managers with unpredictable market circumstances and attendant risks in their ongoing search for "alpha" or returns above that offered on market benchmarks. Fortunately, there are many risk-management tools available to address these risks including CME Group 2-year, 5-year and 10-year Treasury note futures and options; as well as "classic" and "Ultra" T-bond futures and options.

These option contracts offer a high degree of liquidity, transparency, price discovery and are accessible through the CME Globex electronic trading platform.

This represents part two in a two-part series of articles that reviews the use of CME Group options in the context of risk management activities. Part one of the series, "Option Fundamentals for Fixed Income Investors" established a foundation for understanding the pricing of options and the "Greek" statistics used to to measure the impact of various factors on an option's price. This document is intended to review option strategies that can be used to modify the risk-return profile of a fixed income portfolio.