% Rates To Rise – Borrow What You Can!!!

The dollar is in some serious trouble right now and the US is about to go into a swirling riptide of economic chaos.  The credit crisis is freezing up the borrowing of money and will eventually will lead to hear interest rates. Interest rates are a reflection of supply and demand , the more people that want to borow and the less people that want to loan means pay up on rates, not nly will this lead to higher rates but it will mean a weaker dollar or buying power . How do we make money off of this?  The Eurodollar futures market is the rates at which you receive interest on your money in the bank , so by selling Short the Euro  dollar futures contracts you are basically borrowing money at the current rate that the bank is willing to pay depositors. This is the European bank rate not the US rates. Lets borrow a half a million dollars worth of money and SELL 5 DEC 09 Eurodollar Futures contract which are trading at 96.70 this is equal to 100-96.70=3.30% for about a year and 3 months worth of time as rates climb every one % rate point pays out $2500 or on 5 positions $12500 so if rates go to 5.30 and the Eurodollar drops to 94.70 then we are winning $25000, I will buy the 5 DEC 09 EuroDollar Calls OPTIONS  to protect my loan at a strike price of 97.50 or 2.5% on the loan rate. This will act as insurance and will cost us 15 pts at $25 a pt times 5 positions or around $1875  in money and will limit our risk to  $12500 on the trade. We can always adjust the position later and lower our loan costs , This is a longer term trade and I believe will be profitable , by buying this insurance we will be borrowing the money at a cost basis of 3.45%. I will keep you posted on what to do with the position as we start to move in either way.  I love our positions in the Dow Jones Options we are holding and looking sweet as the BAILOUT program is only a band-aid on a much bigger problem . Hold steady on the Long Auzzie $ and Short Yen Futures positions as well as our Dow JONES Option Positions. Rates are on the rise borrow what you can …  Please if you read this and dont understand leave a comment or contact me…..Good Trades All