$TLT calls yield big gains for bulls

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

On Jun. 29, Market Rebellion’s Unusual Activity programs flagged the the purchase of 3,900 Weekly $145 calls, expiring next Friday, Jul. 30, for $1.25 with shares at $143.17. Volume was clearly above the previous open interest of 303 contracts, indicating that this was a new position.

Those calls traded for as much as $6.85 so far this session, over 5 times their purchase price. The stock rose 5.94% in the same time frame, illustrating the kind of leverage that can be achieved quickly with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

TLT was last up 2.4% to $151.77today. The exchange-traded fund rises as yields on longer duration U.S. Treasuries decline.