Officially called the Ultra U.S. Treasury Bond Future, if you’ve watched any of my content on YouTube more than likely I’ve mentioned and/or traded the Ultra Bond. The Ultra Bond goes by the symbol UB for reference. More about my favourite product to trade down below. I’ve listed out what I think are the most important and basic aspects to know, but there is certainly more to it.
First: The CME Official Information
If you want to get to the official source of all things Ultra Bond, visit the CME Groups website. They will list every single contract spec you could want, the volume traded, front month and more.
CME Group Ultrabond Contract Specs: https://www.cmegroup.com/trading/interest-rates/us-treasury/ultra-t-bond_contract_specifications.html
Contract Unit
1 Ultra Bond futures contract represents 1 ultra bond with a face value at maturity of $100,000
Price Quotation
The price of the ultra bond is quoted in points ($1 increments), followed by a 1/32 fractional amount, with a basis of 100 points. Sound confusing? See the example below.
For example, below is a quote from today. The last price was 182’05, meaning there is 5/32’s for the last 3 digits, which equals $156.25 ($1,000/32 X 5). The fully written price would be $182,156.25. You will never see this price though while trading, you’ll see 182’05.
Tick Increment
Since the price trades in 1/32’s, each tick movement is 1/32 of $1,000 or $31.25. So if you were long 1 contract at the price of 182’05 and sold for 182’06, you would make 1 tick, or $31.25.
Worth mentioning the 30 Year U.S. Treasury Bond (ZB) also trades in this same manner, 32nd’s. When you get to the 10 Year and 5 Year, they trade in 1/64’s, or $15.63 per tick.
Contract Months
Ultra Bond is a quarterly contract, with listed contracts ending in March, June, September and December. Trading terminates at 12:01 p.m.on the 7th business day prior to the last business day of the contract month.
So What IS The Ultra Bond?
You’re thinking great Canadian Futures Trader, thanks for giving me a bunch of info I could see on the CME website. Still, what is the Ultra Bond?
From the CME Group themselves:
U.S. Treasury bonds with remaining term to maturity of not less than 25 years from the first day of the futures contract delivery month. The invoice price equals the futures settlement price times a conversion factor, plus accrued interest. The conversion factor is the price of the delivered bond ($1 par value) to yield 6 percent.
How I Describe It:
“The Ultra Bond Treasury Contract (UB) are for 30 year US Treasury Bonds with expirations of 25 years or greater. This compares to the 30 Year Treasury Bond Futures Contract (ZB) which are for the same 30 Year Treasury Bonds, but with expirations in the 15 to 25 year range. Same product ultimately, different time horizon.”
Usually people are still completely confused, but I’m not sure how to make it much more simple. Most people can’t wrap their heads around how they are both the 30 Year US Treasury Bond, but somehow different. Remember, you are trading a CONTRACT to purchase the 30 Year Bond, you aren’t trading the actual bond itself. Those basket of goods that contract represents are the same underlying product, but some are older than others.
To take it 1 step further, there’s a reason the Ultra Bond has more movement than the 30 Year (ZB). It’s a contract that represents a product that’s further out in time, and thus there’s more time sensitivity.
Conclusion
Hopefully that helps you aspiring Ultra Bond traders. I think it’s important to understand what you are actually trading, not just the product codes and tick sizes.
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