$TLT option bears double money

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

On Dec. 2, Market Rebellion’s Unusual Activity programs detected the the purchase of 10,000 February $148 puts for $2.88 with shares at $152.49. Volume was clearly above the previous open interest of 551 contracts, indicating that this was a new position.

Those puts have traded for as much as $6.56 so far this session, over double their purchase price. The stock fell 6.4% 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 0.42% to $143.09. The exchange-traded fund declines as yields on longer duration U.S. Treasuries rise.