$TLT calls deliver yield

Option traders are collecting a positive yield in upside positions on the iShares 20+ Year Treasury Fund (TLT) today.

On Jan. 13, Market Rebellion’s Unusual Option Activity Service found that 10,000 April $90 calls were bought as part of a complex bullish spread for $1.26 with shares at $85.32. This was clearly fresh buying, as open interest in the contract was just 7,054 before the activity appeared.

Those calls have traded for as much as $4.35 this session, a 245.24% return, while the stock rose 10.15% at the same time, underscoring how options can far outperform their underlying shares.

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 closed at $92.85, up 1.09% on the day.