$TLT bears find yield in puts

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

On Apr. 16, Market Rebellion’s Unusual Activity programs flagged the the purchase of 5,000 Weekly $137 puts, expiring next Friday, May 7, for $0.62 to $0.63 as part of a bearish spread with shares at $140.02. Volume was clearly above the previous open interest of 496 contracts, indicating that this was a new position.

Those puts have traded for as much as $1.16 this session, nearly double their purchase prices. The stock fell 2.04% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

TLT was last lower by 0.5% to $138.03. The exchange-traded fund declines as yields on longer duration U.S. Treasuries rise.