Bond bulls profit in $TLT

Bullish option traders posted exponential gains on upside positions opened, less than a week ago, in the iShares 20+ Year Treasury Fund today.

On Nov. 30, Investitute’s market scanners identified the purchase of 9,000 December $116.50 calls for $0.39, as part of a bullish spread, with shares at $115.07. Volume was well above the strike’s open interest of 94 contracts, showing that this was a new position.

Those calls traded for as much as $2.56 today, better than 6 times their purchase price. The stock has gained 3.15% in the same time frame, a large move, however nowhere near that of its options on a relative basis.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

TLT jumped to an intraday high this morning of $119.20 before pulling back to close up 0.31% to $118.91. The exchange-traded fund, which tracks U.S. Treasuries with maturities greater than 20 years, has risen sharply over the last two sessions as investors seek safety in bonds as uncertainty remains on the U.S.-China trade front. Equities and bonds usually trade inversely to each other.