Puts on TLT

Discussion in 'Options' started by trom, May 7, 2009.

  1. trom


    I'm am looking into purchasing long dated puts on TLT. My thinking is that there will come a time when the Fed will need to raise rates. Suspending disbelief, and actually assuming that the talking heads are right and we will be recovering by 2010, won't Treasuries have to come down as the Fed scrambles to control rates? The only way I can not see this working out is if we end up like Japan and maintain extremely low rates for years and years.

    Does anybody have any opinion as to what the best date/strike would be for this trade? Maybe an different instrument entirely?
  2. TBT ultra short for TLT
  3. trom


    TBT is a horrible long term hold, though. Suffers the same problems as all of the leveraged ETFs do over time.
  4. Congrats on catching the obviously stupid advice.

    That's the problem here. You must be alert to the uninformed who love to offer advice.

  5. What do you think about the eurodollar options instead. Far more liquid. A lot more strikes, and also less mystery as to how the darn thing moves.

    Mark S.
  6. I'm no quant, but I'd expect the time decay on a long TLT put position is likely to be even worse than the ETF decay of TBT shares.
  7. trom


    I realize there would be a large premium and time decay. But, the deal breaker is the fact that the dollar value of TBT, over time, becomes completely meaningless with respect to its underlying.