Learn the trade here. Make it on tradeMONSTER

Options Trading News

November 9, 2012  Fri 10:06 AM CT

TLT: SEE CHART GET CHAIN FIND STRATEGIES
The TLT Treasury exchange-traded fund has been climbing with this week's equity selloff, and one option trader sees more gains ahead.

The iShares 20+ Year Treasury Bond Fund is down fractionally today, trading at $125.60. It has been on the rise for the last few weeks from support at $120 and yesterday blasted higher to its best close in more than two months. The recent action has driven the short-term correlation between the S&P 500 and the TLT back up near -0.9.

optionMONSTER's systems show that a trader bought 5,000 December 130 calls for the ask price of $0.82 against open interest of just over 5,000 contracts. At the same time, he or she sold 10,000 December 135 calls for $0.25 at volume that was more than 5 times the previous open interest, indicating that this is a new position.

It is possible that the December 130 calls were bought to close a trade, but that looks highly unlikely. So this appears to be a new ratio spread opened for $0.32, which is the amount at risk if the TLT remains below $130. The maximum profit of this call vertical would come if the fund rises to $135, a bit above the all-time high from July, when it traded above $132. (See our Education section)
Share this article with your friends


Premium Services

Free Webinars

Education & Strategy

Why traders hedge with sector ETFs

Many people who are not familiar with options think that they increase risk, but their first and primary purpose is...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER