Given the negative convexity of Bond Futures I can combine a short futures position with a long position in one of the deliverable bonds to create options profiles. If I sell a futures position and buy a long duration deliverable bond i get the profile of long CALL on the Bond, and if I take Short positions in the futures and buy a short duration deliverable bond i get the profile of a long PUT option on the bond. The basis is calculated as SP - (FP*CF) (spot price of the bond - futures price*conversion factor).What I do is assume a given yield curve and move that curve only in a paralel fashion (no steepness change or curvature change). And I calculte the Futures price as Spotprice + Acrrualspot + funding - coupon paymentsFV - AccrualuturedateI see the options profile, but when i am simulating the P&L of the positions i get little confused on how to adjust the position. What i am doing is if the size of the contract is 250 and i trade 4 future contracts then my nominal spot position is 250*4/CF of the bond that i am buying.I am not sure about that adjustment !!Great to hear some comments about it !!!!!!!!THANKS

One of the embedded options is the cheapest-to-deliver (CTD) option. What happens to your strategy if the CTD changes?

Since I am always selling futures I am long the CTD option but I am trying to express a view on interes rates. Let me elaborate more on my example. Lets say for example that i have a flat yield curve where all the deliverable bonds are trading at the same yield. lets say that the market is at the same yield than the futures bond coupon. At that point i think all of the bond have the same conversion price Fwdprice/CF (am i right?)Now lets say I buy the basis with the higher maturity bond. (sell the future buy Higher maturity bond) so the basis i bought can be measured HM(higher maturity) Spot(HM) - FP*CF(HM). as yields move up the basis gets closer to zero (CTD becomes the higher maturity bond) but as yields come down the basis between the higher maturity bond and the futures price increses (due to the negative convexity of the future price). so that basis looks like a Long CALL option on the bond. Assuming that is correct lets say that i expect yields to move down the contract size is 250 and i sell 4 contract = 1.000 nominal, what should be the size of my nominal position on the cash bond (longer maturity bond) should it be (250*4)/CF or should I use antother number ?