TLT Puts

Discussion in 'Options' started by Hello_Dollars, Mar 9, 2004.

  1. Might be an interesting way to play a correction of the overbought condition in the 10-year (assuming you read it that way). Implieds are low across the board. Then again, so's the open interest (though it's not as anemic as with the TNX). Hence, be prepared to pay up a bit for the privilege. Still, seems like a reasonable bet.
  2. probably better to turn to the cbot for futures on the very 10yr notes you have an opinion on -- the TLT etf is for further out on the yield curve (20+ yrs) and you seem to have a very specific opinion about a very specific part of the curve.

  3. 2 better ways:

    RRPIX - mutual fund

    Short bonds
  4. Wee, perhaps, but as a rule, I don't do futures. Also, the overbought condition to which I referred applies to the long end of the yield curve, generally. That's why, as you may have noticed, the TLT correlates pretty well with the 10-year. Thus, the TLT should be an appropriate vehicle for playing this.
  5. ok, i understand about futures. how about the mortgage gse's as a liquid proxy, albeit imperfect, for the long end of the yield curve? good ole fannie mae (FNM) and freddie mac (FRE) tend to move along with bonds -- and you get excellent liquidity. TLT seems perfectly workable too. go for it!
  6. Thanks, Wee. Interesting idea on using FNM/FRE. I'll definitely check it out.
  7. maglia rosa

    maglia rosa Guest

    tlt puts are currently bid too high, since the stock is hard-to-borrow, so you may be overpaying in terms of volatility just because people are trying to get short through the options.
    also not just t-notes, also t-bonds are overbought so effectively doesn't matter which one you're looking at.
  8. Uh, thanks, but I'm in them since Wednesday. Implieds are up nearly 100 bps from when I bought them (though they're still low on a relative basis), and I'm showing an open 25% profit so far. Now if treasuries actually start to sell off over the coming weeks, these might actually get interesting.
  9. Looking good, fellas. Hope some of you joined me in this play.