Strategies · Library · Fixed income
§5.11Carry
Carry factor
Estimate each bond's expected gain as its yield plus the price gain from sliding down the curve as it ages, then buy the highest-carry and sell the lowest-carry bonds.
- Asset class
- Fixed income
- Held for
- Months
- Data
- Needs data ARCANE lacks
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Yield plus roll-down return per bond, using the curve shape
- Entry and exit
- Buy the top tenth by carry, short the bottom tenth; rebalance periodically.
- Sizing
- Equal across each leg
How it fails
- Carry trades fail when curves shift
- Short leg
- Data demands
Data it needs
- inputs ARCANE does not hold
Needs bond-level yields and curve data; the short leg is core.
How ARCANE uses it
Not drafted; a curve-shape Call could mention carry (paper only).
Needs a yield curve model and shorting.
Filed under the carry card
Own what pays more than it costs to finance (the return if prices stand still) and sell what pays less, across currencies, bonds, commodities and stock indexes.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §5.11, p. 75 of the SSRN version. Described in our words. Carry is ARCANE’s filing, not the book’s.