Client Trade Ideas and Risk

1.A pension fund expects yields to fall and asks how to position. Its portfolio is already below its liability-duration target. What should you establish before pitching a trade?

2.An insurer wants extra income over the next six months. Its mandate prohibits taking on additional below-investment-grade credit. What belongs in the first comparison?

3.A cash manager may need the whole investment in two weeks. A six-month bond yields more than a Treasury bill. Which question matters most?

4.An asset manager asks for downside protection on a concentrated stock holding and says giving up upside is unacceptable. Which structure fits that preference, assuming its premium is within budget?

5.A fund is allowed to buy bonds but cannot post derivatives collateral. Which way to add Treasury duration fits the stated mandate?

6.A corporate client expects to receive a fixed amount of euros in three months and reports in dollars. It wants certainty on dollar proceeds. Which trade directly fits?

7.A portfolio manager wants to lower equity exposure until a policy decision next month and avoid selling individual holdings. What should you ask about an index futures hedge?

8.A manager cannot own securities issued by a certain industry. You propose a broad corporate-bond fund. What needs checking before presentation?

9.A client asks for an idea with a one-week catalyst but needs risk reports using a monthly horizon. What should the pitch include?

10.A bond manager already holds a large position in the same issuer as your proposed trade. Which figure is most relevant for sizing?

11.A family office says its primary goal is capital preservation, then asks for the highest possible yield. What is the best first response?

12.A sovereign investor has an approved list that permits an issuer's senior debt but excludes subordinated debt. Which trade fits a positive view on the issuer?

13.A client requests a relative-value trade but cannot short securities or use derivatives. It owns Bond B, and you think Bond A will outperform B. What is a feasible expression?

14.A client evaluates performance versus a short-duration benchmark. Your idea adds meaningful duration. Which risk should you put in benchmark terms?

15.A client has $20 million of cash but must keep $8 million available for redemptions. It also wants to keep a separate $3 million buffer. What is the most it can deploy under those constraints?

16.A client says they want protection against a commodity shock. Their costs are tied to a regional spot grade, but the liquid contract references a different grade. What should the opening discussion cover?

17.You expect intermediate Treasury yields to fall as growth weakens. Which pitch connects the view to an instrument and a condition that would challenge it?

18.The market expects three cuts by year-end. Your research also expects three cuts on the same dates. What must you establish before pitching a trade that profits from more easing than priced?

19.The thesis is that five-year credit spreads will tighten relative to comparable Treasury yields. A client wants limited exposure to outright rate moves. Which structure best targets the thesis if eligible?

20.You believe a company's results will beat expectations, but the stock already jumped on a favorable update. What question helps test the proposed long?

21.An equity client sees a modest rally over two months and wants to pay less upfront than for an outright call. They accept a cap on gains. Which structure fits?

22.A client expects a stock to fall but wants a known maximum loss and has no existing shares. Which position fits?

23.You expect the ten-year yield minus the two-year yield to widen and want to limit first-order exposure to parallel rate moves. Which bond pairing fits when the legs are matched by DV01?

24.A client agrees that commodity prices could rise, but futures for the anticipated exit month already trade well above spot. What should the pitch distinguish?

25.Two trades express the same rates view. One needs a rebound within a month to avoid expiration, while your catalyst may take a quarter. What should guide the choice?

26.You expect a currency to weaken, but the client receives revenues in that currency and only wants to hedge half the expected receipts. What size fits the objective?

27.A research view depends on a retailer refinancing before its next maturity. Which evidence is most useful to track after the pitch?

28.A trade thesis is that a bond is cheap to comparable debt because of temporary selling. Which comparison best tests the price claim?

29.A company announces a special dividend, and a fund asks whether the stock is certain to rise. What is a useful response for a trade pitch?

30.Your view is that two issuers' credit spreads will converge. Why include a case in which both spreads widen together?

31.A sales note says, “Buy the bond because its yield is high.” Which revision turns that into a testable thesis?

32.A commodity producer wants a minimum sale price but wants to benefit if the price rises. It accepts an upfront premium. Which hedge fits, assuming the contract tracks its production price?

33.A proposed $10 million Treasury position has a DV01 of $7,500. What is its approximate price P&L if its yield rises 12 basis points, ignoring convexity and carry?

34.A client is long a bond portfolio with $24,000 of DV01. Each Treasury futures contract has $80 of DV01 when long. Approximately how many price-based contracts should it short for a first-order hedge?

35.A fixed-rate corporate bond's Treasury benchmark yield falls 15 basis points, but its credit spread widens 25. Ignoring other changes, what happens to its yield and price?

36.An eligible callable bond yields more than comparable noncallable debt. Which risk should the client understand if rates fall?

37.A bond is quoted at 98.40 clean with 0.65 of accrued interest per 100 of face value. What is its settlement price per 100 before fees?

38.A bond sleeve has modified duration of 4.5. About how much would its value change if its yield rose 40 basis points, using a first-order estimate?

39.A floating-rate note looks attractive because the client expects higher policy rates. Which risk remains even though the coupon resets?

40.A spread trade is financed overnight, but the catalyst is three months away. What does the client need to consider?

41.A credit investor compares two bonds from one issuer. One is senior secured and the other subordinated. What should accompany a comparison of their yields?

42.A client wants exposure to a flattening of the five-to-thirty-year curve. Which scenario helps expose residual risk even if the trade starts DV01-neutral?

43.A bond is described as yielding 6% to maturity. Which condition matters for the realized return of a client that plans to sell in six months?

44.A $5 million credit trade has spread DV01 of $2,200. A stress scenario widens spreads by 35 basis points with benchmark yields fixed. What is the approximate loss for the long position?

45.A short position in a Treasury future is hedging a long corporate portfolio. Treasury yields stay flat while corporate spreads widen. What is the likely result, all else equal?

46.Two bonds offer the same yield. Bond A has worse liquidity and more credit risk. Which feature could still make A worth a closer look for this client?

47.A buy-side client asks if a bond's 8% yield means its coupon is 8%. What is the clearest answer?

48.An idea relies on buying a bond ahead of a likely ratings upgrade. What happens if the upgrade arrives after the client must sell?

49.A euro-area investor buys a dollar bond. It gains 4% in dollars while the dollar falls 5% against the euro. What is the unhedged euro return, ignoring fees?

50.A US investor hedges expected proceeds from a foreign bond with a currency forward. The bond falls in local value before it is sold, but the forward notional stays unchanged. What can result?

51.The client says an FX forward has no premium, so it must be free. What should the salesperson explain?

52.A client expects a foreign payment but is unsure it will arrive. They want protection against a drop in its home-currency value without a mandatory conversion. What fits?

53.A protective equity put struck at $95 costs $3 per share. At expiry the stock is $88. What is the put's net gain per share before fees?

54.A client buys a $100 call and sells a $110 call with the same expiry for a net debit of $4 per share. The stock closes at $115 at expiry. What is the spread's net profit per share?

55.A client buys a 100-strike put and sells a 90-strike put of the same expiry as an equity hedge. The stock falls from 90 to 80 at expiry. What happens to the spread payoff?

56.A client pays $2 for a $50 call. What stock price is the break-even at expiry, before fees?

57.A client buys a straddle to profit from a large earnings move. The stock moves slightly and implied volatility drops after the release. What can happen to the position?

58.A client asks how a collar with zero upfront net premium changes its stock exposure. What should the explanation emphasize?

59.A client wants to buy a call for a known maximum loss. The ticket quotes a $1.70 premium and a 100-share multiplier. What is the premium at risk for 15 contracts before fees?

60.A client expects a large stock move but is unsure of direction. The near-term straddle is already expensive. What comparison should anchor the pitch?

61.A client plans to hedge with a one-month put but expects to hold the equity for six months. What risk remains after the put expires?

62.A currency desk quotes 1.0800 dollars per euro spot and 1.0860 forward for a three-month delivery. A US client buying €2 million forward asks how many dollars it will pay at delivery. What is the answer?

63.A client owns a long call and expects a gradual rally. What is a risk even if the stock eventually reaches the expected level?

64.A client hedges an equity portfolio with a put on a broad index. The portfolio is concentrated in small-cap firms. What should a downside scenario include?

65.A bond is offered at 101.20 for $2 million face, and the client wants $8 million. What can you responsibly say about the price?

66.A portfolio manager wants an indicative level before an investment committee meeting. How should a salesperson label it?

67.A salesperson tells a client a bond is 99.25 without specifying side. The client thinks it is the price they can sell at. What should the salesperson clarify?

68.A manager urgently needs to sell a thinly traded bond. What is the practical trade-off between immediate and staged execution?

69.A proposed bond switch sells one line and buys another. If the legs cannot execute together, what should the client understand?

70.A client compares two otherwise identical cash-bond ideas. Estimated six-month gross returns are 1.2% and 1.0%. Round-trip costs are 0.5% and 0.1%, respectively. Which has the higher estimated net return?

71.A bond pitch shows an expected gain of 60 basis points over a month. Estimated round-trip costs are 45 basis points. What expected gain remains after these costs?

72.A dealer can show one price for $1 million, but a client wants $20 million. Which question helps assess the larger order's impact?

73.A futures hedge gains in the target stress but requires cash margin during a rally. What should be included in the client discussion?

74.A client compares returns across two pitches. One is a three-month total return and the other is annualized. What should you do before ranking them?

75.A client wants to exit a hedge as soon as an economic release is published. Liquidity is often thin just after that release. What should the pitch say?

76.A portfolio manager asks for the yield on a bond bought at a discount. The quoted yield assumes no default. What should accompany the number?

77.A client buys a product in a different settlement currency from its funding account. What operational detail belongs in the plan?

78.A fund wants to reduce slippage versus a 10 a.m. arrival benchmark. Which data should you retain for the post-trade review?

79.A client asks if a high-volume ETF will always trade near the value of its holdings during a market disruption. What is the best response?

80.A client has to choose between buying a bond now or waiting for a larger new issue. What is a fair comparison?

81.A client asks what would invalidate a duration-long trade based on cooling inflation. Which response makes the condition observable?

82.A credit trade has a base gain of $70,000, a stress loss of $150,000, and a client loss budget of $100,000. Assuming P&L scales linearly, what fraction of the proposed size fits the stated stress budget?

83.A pitch shows a $40,000 base gain with 60% probability and an $80,000 loss otherwise. What is expected P&L before fees?

84.A proposed risk slide shows a mild yield rise and a mild yield fall. The client worries about a simultaneous credit shock. What scenario should you add?

85.A client asks if a 95% one-day value-at-risk estimate of $1 million is the maximum possible loss. How do you answer?

86.A proposal shows a $60,000 gain in a rally and a $120,000 loss in a selloff. The client asks how to explain the imbalance internally. What is clearest?

87.A hedge is expected to offset a risk in normal markets. During stress, its historical correlation with the portfolio has been unstable. What should you show?

88.A client asks whether a stop level makes a leveraged trade's maximum loss equal to the distance to the stop. What should you explain?

89.A trade gains even though the catalyst failed, because the whole sector rallied. What is a sound follow-up?

90.A salesperson pitched a defensive equity trade before a policy decision. New information contradicts the pitch before the client has executed. What should the salesperson do?

91.A client asks you to compare a futures hedge with a purchased put. Which explanation is most helpful?

92.A colleague quotes an option's maximum loss as the upfront premium, but the proposed strategy includes a naked short call. What is the key correction?

93.A portfolio manager is skeptical of a pitch because the two best historical examples are from falling-rate years. What could strengthen the analysis?

94.A client likes the thesis but the trade has moved most of the way to the original target. What should the salesperson update before re-pitching?

95.A trade idea shows a 3% price target and a 1% coupon contribution over the holding period. The expected round-trip cost is 0.4%. What is the scenario's estimated net total return, using additive approximations?

96.A portfolio already has substantial exposure to a particular inflation outcome. A new trade profits under that same outcome. Which pitch detail matters for the risk committee?

97.A trade is projected to earn positive carry each month. Which statement about its downside is accurate?

98.A salesperson models a $25,000 loss for a one-standard-deviation move. What should they say about a surprise policy announcement?

99.A hedge has two possible sizes. The larger reduces modeled market losses further but creates margin calls the client could not fund. Which is appropriate under the client's funding constraint?

100.A proposed pitch opens with a chart and a list of technical terms. The client asks for the decision in one minute. What should the response lead with?

101.A client asks why a trade failed after the market moved in the forecast direction. The entry price had already implied a larger move. What is the clearest explanation?

102.A client agrees with the thesis but declines the idea because there is no clear exit if it goes wrong. What change would make the pitch more useful?

103.A fund is considering a cross-market trade with $10 million per leg. Why explain gross exposure even if the signed notionals net to zero?

104.A client wants to know whether to keep a trade after its catalyst occurs and the spread reaches the target. What should the follow-up emphasize?

105.A bond fund expects spreads to tighten after a planned asset sale. Its benchmark duration is already at target. Which pitch best captures the idea and the main trade-off?

106.An airline wants to hedge half its fuel bill over one quarter. Only a related crude contract is liquid, and the client can pay option premium. Which pitch explains the hedge and its limitation?

107.A client with a six-week horizon expects a mild index rebound after a policy decision in week four. They have a fixed option loss budget and accept capped gains. Which pitch best fits?

108.A company owes $12 million in two months and earns its cash in euros. It wants certainty for $9 million and accepts market risk on the rest. Which pitch fits?