A ratio spread which is established in a given market and combined with a short or long position in an interest rate futures contract. This trade capitalizes on changing rates or implied repo rate relationships. The overall approach of turtle trade, which plays on the volatility in the futures market, is primarily a trend following strategy with a volatility-based position sizing method.

The trend following involves bracketing the market on either side with a technique like Bollinger bands or moving averages which account for 90% of a market’s price action. Then a long trade is to be entered into when the underlyings trade through the upper band (signaling a new up trend) and go short (bet on falling prices) when the underlyings trade through the lower band (signaling a new down trend). Position size is usually measured by the distance between the entry and a moving average of prices, with larger volatility markets resulting in fewer contracts. Afterwards, trend followers usually stick to the trade until prices fall back to something like a 100 day moving average.