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Stocks & Commodities V. 22:10 (56): Explore Your Options by Tom Gentile

Stocks & Commodities V. 22:10 (56): Explore Your Options by Tom Gentile

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Stocks & Commodities V. 22:10 (56): Explore Your Options by Tom Gentile

Got a question about options? Tom Gentile is the chief options strategist at Optionetics (www.optionetics.com), an education and publishing firm dedicated to teaching investors how to minimize their risk while maximizing profits using options. To submit a question, post it to our website at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C.

INTEREST RATE INDEXES

The five-year note index (FVX), the 10-year note index (TNX), and the 30-year bond index (TYX) are vehicles to trade options on interest rates. My question is, what are the corresponding bond price indexes, and are they optionable? Thank you, Tom your monthly Explore Your Options page is always riveting. Fiorenzo Primavori

The five-year note index ($FVX), the 10-year note index ($TNX), and the 30-year bond index ($TYX) are vehicles some traders use to monitor and profit from changes in interest rates. The indexes actually represent the current rates on various government bonds multiplied by 10. Thus, the 10-year note index reflects the current rate on the benchmark 10-year Treasury note, multiplied by a factor of 10. If the yield on the 10-year note is 4%, the TNX will equal 40. Similarly, the 30-year bond index tracks the yield on the 30-year Treasury bond, and the five-year note index is the yield on the five-year note, times 10.
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