Understanding Treasury Futures and Options

Treasury futures are standardized contracts for the purchase and sale of U.S. government notes or bonds for future delivery. This highly liquid and secure market allows you to gain exposure to interest rates on U.S. government debt at a variety of positions on the yield curve.

The U.S. government borrows money primarily by issuing bonds and notes for a fixed term, at fixed interest rates determined by the prevailing interest rates in the marketplace at the time of issuance of the bonds. Futures provide the ability to lock in prices on these securities for delivery at a later point in time, enabling hedging against changes in interest rates as a result of fluctuations in the U.S. economy and changes in monetary or fiscal policy.

Treasury futures and options are available for six tenors, providing exposure to the major trading points including the 2-year, 5-year and 10-year notes, and 30-year bond. Each of these contracts allows you to gain exposure to a different segment of the yield curve, and each treasury futures market may move independently of the others, depending on market factors.

Weekly Treasury options are set to expire on every Friday, except for those Fridays on which standard serial or quarterly options are scheduled to expire. On those days, a Weekly Treasury Option will not be listed for expiration. Weekly Treasury options provide more opportunities, allowing flexibility in managing existing option positions, targeted trading based on market movement and the ability to trade high-impact economic events.

The Treasury futures and options markets are highly dependent on a wide range of global factors, since they are closely tied to the U.S. economy and economic policy as a whole. Longer-term trends and economic developments may result in trading in the longer-tenor bond markets, while short-term employment or fed policy fluctuations may more directly impact the shorter-tenor note markets. 

Trading the Contract

Treasury futures and options trade electronically nearly around the clock, from 5 p.m. to 4 p.m. Central Time, ensuring an active market for market participants trading a wide range of global economic events.

Market participants trading Treasury futures and options will pay special attention to data points such as fed policy changes and meeting notes, monthly non-farm payrolls, and quarterly GDP numbers. Treasury futures are also valuable tools for gaining exposure to political or economic developments in China, the Eurozone and other global economies, so traders will keep a close eye on the news for any developments that may see expression in the U.S. government debt market. 

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