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The one caveat is that many are thinly traded. Often you are trading against a specialist/market maker. But using limit orders you can usually trade at market prices if you are patient--especially in the 100 to 1000 share range.


I don't know the ABS market at all. What is par for them? Surely not $1,000? That's more size than the "average person" can manage.

Let call 100 bonds a round lot. I can't trade that size, and I'm guessing few who frequent this board can. In fact, I'm willing to bet that anyone who needs to learn how to invest in bonds by participating in Jack's project won't be buying round lots. 5 to 10 bonds is more like it, which means they'll be paying the spread, plus a commish, plus maybe a markup up as well. That kind of friction kills trading profits. Also, for all practical purposes, bonds can't be shorted at the retail level. Therefore, for all practical purposes --as I said-- bonds can't be traded in any meaningful sense of the term. It's a one-sided, buy-and-hold market, for all practical purposes.

Stocks can be traded. Options, futures, futures on options, etc. can all be traded, because position size can be small, and they are liquid, two-sided markets. The treasury market is liquid. But the corporate market, especially the bonds of interest to value investors, tend to be illiquid. Often enough, 5-20 bonds is the whole "national offer" at the moment, and I was buying all of it, and the bonds weren't seen again. I can name issue after issue in which that was the case. We're talking tiny, tiny markets.

A separate point: Yes, a bond investor always has to think like a trader: he has to know where he will get out if the position moves against him. But he isn't able to act like a trader, because the bond doesn't (yet) permit it. Therefore --I'd argue-- it's pointless to talk about trading bonds in the context of learning how to invest in bonds, which is the context of Jack's project. At best, all a would-be bond investor can achieve is the ability to see an opportunity and then the courage to act on it in a size appropriate to his investment account and investment goals, which is always: #1, preserve trading capital (so he doesn't get thrown out of the game and can stick around long enough to learn it), and then #2, break-even profitability, then #3, consistent profitablity (on average and over the long haul), and, finally, increasingly better profitablity (which is equivalent to the same profits at reduced risk).

That's the steps: one, two, three, four, and trading won't play any part of it. Bonds are an investing gig (except for very special players and circumstances).


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