Hello, Tigers!
In lesson 3 we learned how to choose US treasuries and simple investment strategies, in this lesson I will tell you in detail how to trade US treasuries on Tiger Trade app.
Ⅰ. How to buy US treasuries through the Tiger Trade app?
Confirm that Tiger Trade app is the latest version
Before trading on Tiger Trade app, you need to make sure that your mobile app has been updated to the latest version. If not, some functions may be missing or you may not be able to trade.
You can click "Profile", "Settings", "About", "Check for new version" to update the app automatically. "You can also download the update from Tiger's official website.
Confirm that you have opened an account and deposited funds
After checking the version, you also need to confirm whether you have completed the account opening operation on Tiger Trade app and whether your cash account has been transferred to the available funds.
After the above steps are checked correctly, then we can start the next operation.
Ⅱ. Where to find US treasuries?
There are two ways to find US treasuries in the Tiger Trade app:
Search bar
Enter "US-T" in the search bar to see related US treasuries products.
Wealth
Find "Wealth" in the "Quote" interface, and then click on "US treasuries" to enter the Treasury product details interface.
Ⅲ. Choose the right US treasuries
After entering into the treasury products interface, you can see a listing of various types of treasury products:
Products can also be filtered in the screen bar:
In the screen bar, enter the type of treasuries, select the yield to maturity and coupon rate you are comfortable with, and determine the remaining term of the product. You will then be able to find a treasuries product that meets your needs.
For example, you can sort and filter by coupon rate from highest to lowest, or you can select by maturity period.
It's important to note that if a bond is coming to maturity, assuming you're purchasing a small amount, it could create an extreme situation where the commission is higher than the actual return. Therefore, it is important to be aware of the maturity of the bond when purchasing.
Ⅳ. How to see the details page of treasuries?
After choosing suitable treasuries, the next step is to enter the details page of the bond, this interface basically contains all the information of this bond.
With the display above, I use the table below to take you through the information about treasuries one by one:
Information | Interpretation | Key Points | |
1 | Bond Price | The bond price is the price at which you buy this bond, and this figure can change at any time during trading hours. | |
2 | Yield to Maturity | Buying Treasuries at this price and holding the bonds to maturity and averaging them out on an annualized basis is the annualized yield to maturity. | |
3 | Frequency | Frequency refers to how often the bond pays interest, such as twice a year or once a year. | |
4 | Remaining maturity | Remaining maturity is the number of years remaining from the time of purchase until the maturity of the bond. | |
5 | Maturity | It is the maturity time of the Treasury bond. | |
6 | Call option | Call option is the right of a bond issuer to redeem a bond early before it matures under certain conditions. This means that the issuer can terminate the bond contract by paying the principal to the investor while the bond is still outstanding. | If you want to hold a bond for a long time and don't want to be forced to redeem it in the middle of the day, make sure to choose a bond with a "no" call option. |
7 | Mid Price | It is the midpoint between the bid and ask prices in the market. You can use the mid-price as a reference as it usually reflects the supply and demand situation in the market. | |
8 | Duration | Duration is a measure of the sensitivity of a bond's price to changes in interest rates, which can help you predict the direction and magnitude of a bond's price change as market interest rates rise or fall. | In general, the longer the duration of a bond, the more sensitive its price is to changes in interest rates. |
9 | Modified Duration | Modified duration is a variant of duration and is often used to measure the absolute change in bond prices in response to changes in interest rates. | |
10 | Convexity | Convexity of bonds is a financial indicator that measures the nonlinear response of bond prices to changes in interest rates. Convexity is the second-order derivative between the price of a bond and its expected return, and it takes into account how much the curve of a bond's price bends when market interest rates change. | It can help you better understand how bond prices move in response to fluctuations in market interest rates. Bonds with high positive convexity are often attractive to investors because they may earn higher price returns when market interest rates fall. |
11 | Accrued interest | Accrued interest is not a fee, it is interest paid by the buyer to the seller for the holding period. Although bonds usually pay interest only once every six months, the accrued interest is calculated every day after buying and holding, and the buyer will need to pay this to the seller at the time of the transaction. The accrued interest is cleared and recalculated after the interest is paid. Give an example of accrued interest: Suppose there is a Treasury bond with a face value of $1,000, a coupon rate of 5%, and interest accrues twice a year, on June 30 and December 31, respectively. Now suppose you purchased this Treasury bond on September 1 and the next interest payment date is December 31st. This means that you need to pay the seller accrued interest when you purchase the treasuries. Then, the accrued interest is calculated as follows: Face Value × Coupon Rate × (Days Unpaid / 365) The number of unpaid days runs from June 30 to September 1 , for a total of 63 days. Because the face value of the Treasury bond is $1,000 and the coupon rate is 5%, the accrued interest is: Accrued Interest = $1000 × 5% × (63 days / 365 days) ≈ $8.63 So, if you purchased this Treasury bond on September 1, you would have to pay the seller about $8.63 in accrued interest for the interest he should have earned. Then, on December 31 of that year, you would get the full interest payment. (Note: The above cases use a common algorithm for accrued interest for ease of understanding; each organization has a different definition of the "interest accrual factor", which is based on the actual calculation results) | It is the interest that the buyer compensates the seller. |
Ⅴ. The treasuries order page operation
After understanding the above transaction information, click "Buy" to enter the treasuries order page.
This page has several steps you need to know:
Trading direction
There are two trading directions: buy and sell. If you don't hold treasuries, just click Buy. If you hold Treasuries and want to sell them, click Sell.
Order types
There are two types of orders you can choose to trade treasuries in Tiger Trade app: Limit Order and Market Order.
A Limit Order is an order to buy or sell a certain amount of treasuries at a specific price. When a Limit Order is submitted to the market, it will be executed at the specified price or better, otherwise it will not be executed.
Its main feature is to help the investor better control the price of the trade, but it does not guarantee that the trade will be successful.
A market order is a request to immediately buy or sell a certain amount of treasuries at the current market price. Its main feature is the speed of execution as it will immediately match the best available price in the market. However, a market order does not guarantee the price of the transaction, which means that a market order may be filled at a price higher or lower than the current market quote.
So, how do you choose between these two types of orders?
It's simple, if you only want to trade at a particular price, then go with a limit order. If you want to trade quickly and don't care too much about price fluctuations at the time of purchase, then go with a market order.
Nominal value
The face value of a bond is the amount returned to the investor by the issuer at maturity. Whether you buy a bond above or below the face value, you will only get back the face value at maturity.
It is important to note that the minimum face value for trading treasuries on Tiger Trade app is 1000.
Order validity
The order validity period refers to how long the order can be kept after the investor has placed the trade order. In treasury trading, there are generally two options: valid on the day (DAY) and valid indefinitely (GTC).
Choosing valid for the day means that if the order is not filled after today's trading day, then it will be automatically voided. While Unlimited Validity will hold the order for you and keep it on the Tiger Trade app for a maximum of 90 days.
Estimated amount
Estimated amount refers to how much money you are expected to spend after entering the limit price and face value, but there may be some difference between it and the final actual transaction amount, you need to take the actual transaction amount as the basis.
*Regarding the max buying power: If the purchase amount exceeds the available cash limit, you will have to pay additional interest in the financing.
VI. Viewing the finalized trading interface
When you enter the correct order information, and click on the "buy order", if the transaction is successful, you can view the completed interface. Here is all the information of the transaction, including order details, transaction details, and cost details.
VII. Trading fees for bonds
When you trade US treasuries on the Tiger Trade app, you'll generally face three types of fees: commission fees, platform fees, and custodian fees.
The current fees are as follows:
Commission: face value*0.08%
Platform fee: face value * 0.04%, minimum $5, maximum $15.
Custodian Fee: 0.08% annualized rate, based on the daily closing price to calculate the day's custodian fee.
Commission | Platform Fee | 90-Day Escrow Fee | Total Fees | Total Rate | Annualized Rate | |
10000 | 8 | 5 | 1.97260274 | 14.9726027 | 0.15% | 0.61% |
100000 | 80 | 15 | 19.7260274 | 114.726027 | 0.11% | 0.47% |
1000000 | 800 | 15 | 197.260274 | 1012.26027 | 0.10% | 0.41% |
(* Cost estimates are for reference only; actual costs depend on factors such as bond price fluctuations, holding period, etc., and will not be exactly equal to the estimates)
In the table above, I've done the rate calculations for you. As you can clearly see from the data in the table, the larger the face value of the treasuries you purchase, the lower the total and annualized rates you will incur.
Therefore, for treasuries, the more money you buy, the lower the cost!
Okay, you've learned how to trade US treasuries on the Tiger Trade app. Now open your first treasury trading order!
This issue of the "US treasuriesInvestm ent Courses" is coming to an end, I hope you can master this simple and practical course as soon as possible, and be able to learn by example, to find more trading skills and ideas!
See you in the next course!