As trading on interest rate futures work like any other futures contracts, you can go long or short. On our platform, there is an inverse relationship between interest rate futures and interest rates.
So, for rising interest rates, you’d adopt a ‘short’ position on the futures contract, within your chosen date range. When going short, you’re ‘selling’ a derivative contract to open your trade, and your profit or a loss will depend on whether your prediction is correct.
To close your trade once (to lock in possible profits or limit any losses, you’d ‘buy’ the interest rate derivative to effectively buy the derivative back.
It’s important to remember that short-selling is a high risk trading method because bond prices could keep rising – in theory, without limit. This means that, if you open a short position, you’re at risk of incurring unlimited losses. That’s because there’s no limit to how much interest rates can rise, so always trade wisely with a risk management strategy in place.