$TLT puts yield big gains for bears

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

On Dec. 9, Market Rebellion’s Unusual Activity programs flagged the the purchase of 23,000 March $150 puts for $2.60 to $2.65 as part of a bearish spread with shares at $156.48. Volume was clearly above the previous open interest of 5,928 contracts, indicating that this was a new position.

Those puts traded for as much as $13.00 this session, over 4.5 times their purchase price. The stock fell 12.7% 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 lower by 1.63% to $138.54 at the closing bell. The exchange-traded fund has declined as yields on longer duration U.S. Treasuries rise.