• Market:  March 2006 30 Year T-Bond (USH6)
• Tick value: 1/64th point = $15.625
• Option Expiration: 02/24/06   
• Trade Description: FOMC Strangle
• Max Risk: $1000.00
• Max Profit:  unlimited, but goal is $500 - $1500 per spread

***The next Federal Open Market Committee(FOMC) meeting is scheduled for Tuesday, January 31. This trade is designed around this meeting as usual.

Buy one call and one put, one strike price away from wherever the current price is on the March 30 Year T-Bond futures contract prior to the FOMC meeting. For instance, today the March 30 year US T-Bond contract is very near 113 so if we put this trade on today we would buy one March T-Bond 112 put, and buy one March T-Bond 114 call, for a combined cost and risk of 64/64th ($1000) or less to open a position.

Technical/Fundamental Explanation
Bonds have been in a rising channel since bottoming in November 2005. We have just now broken out of that channel to the downside. Today's GDP number came in much lower than expected and that may weigh heavily on bonds as the days go on, even though that flies in the face of econ. 101. The bond market is still at odds with itself about how near the Fed. is to ending its rate hiking cycle. Tuesday's FOMC meeting is going to be more of a farewell tour than anything else as every one kisses Mr. Greenspan goodbye. We are not likely to know much about how Mr. Bernanke is going to be until his first meeting on March 28th. So uncertainty should remain high until at least then. As usual with this trade, we are not trying to predict what the Fed. is going to do, but rather we are simply betting that continued uncertainty about future FOMC policy should cause a spike in volatility.

Profit Goal
Max profit is unlimited but a realistic profit goal is between $500 - $1500 per strangle. We always recommend that people put a minimum of two spreads on at a time, that way we can try to cover one quickly with enough profit to let the other run its full course with little to no risk.

Risk Analysis
Max risk is the cost of the trade assuming a fill of 64/64th ($1000). This occurs at expiration with March T-Bonds trading between the strike prices that are bought.

Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.

Matt Odom is the Managing Partner and Energy Analyst and Derek Frey is Head Trader at Odom & Frey Futures & Options.