The &#8220-&gt-34&#8243- contracts are being offered at 96. If you discount the possibility of the marginal tax rate for that year being below 34%, this is an annual yield of about 1.5%, after transaction fees. The 2010 &#8220-&gt-34&#8243-s are paying around 1.35% and the 2011s, 1.2%. Buying any of those allows you to sell higher contracts on the ladder at reduced margin, as described before.

A possible trade that stands out on the board is to sell the 2010 &#8220-&gt-36&#8243-s in the high 70s and buy the 2010 &#8220-&gt-38&#8243-s for 50. I don&#8217-t see how a spread of 30 is warranted there, as any legislation that accelerates the Bush tax cuts sunset will likely put the highest marginal rate at 39.6%, higher than 38% at least. That is, I think the market&#8217-s implied probability of the rate ending-up in the 36-38 bin is too high. This trade would make roughly a 39% return on frozen margin, which could be improved to 50% by additionally buying the &#8220-&gt-34&#8243-s at 95. (unannualized)