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October 5, 2011  Wed 9:31 AM CT

TLT: SEE CHART GET CHAIN FIND STRATEGIES
Put activity dominates this morning's option trading in the TLT Treasuries exchange-traded fund as it continues to come off its highs.

The iShares Barclays 20+ Year Treasury Bond Fund trades at $121.31, off 0.76 percent on the day after hitting a new all-time high of $125.03 yesterday morning. It has climbed from $95 in late July, and the negative correlation between the fund and the S&P 500 remains high at -0.91.

The October puts dominate the options volume, with one trade including 44,000 of the 52,000 contracts trading so far. The trade involved 11,000 October 120 puts that went for $2.20 and 33,000 October 112 puts for $0.33. The volume was roughly 10 times the previous open interest at both strikes.

It appears that the higher-strike puts were bought and the lower sold to create a put ratio spread that would take a maximum profit if the TLT falls to $112 by expiration. The fund gapped up from that level in mid-September. (See our Education section)
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