Bonds are going on tilt. How to play them, says Mike Khouw — SkimNews
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- TLT options volume surged to ~1.6 million contracts on Thursday — nearly double the average daily volume — with 856,750 puts traded at roughly 3.3x the norm.
- The October 79 put was the most active contract (123,649 contracts at a $0.4786 average), and a 65,000-contract October 80/79 put spread traded at a $0.275 net debit — a ~$1.8 million bet TLT breaks below $80.
- 30-year Treasury yields broke decisively above their Q4 2023 highs in recent weeks and rose another 7.6 bps the day TLT closed at $80.78 after touching an intraday 52-week low of $80.665.
- Mike Khouw notes the put spread pays better than 2.6:1 if TLT hits $79 by October expiration — a $1.78 move in 35 days, comparable to the fund's Tuesday-highs-to-Thursday-lows swing — and reminds readers TLT lost ~52% from 2H 2020 through late 2023 in the prior long-rate selloff.
Why it matters: Traders are betting $1.8 million that TLT drops below $80 by October — a 2.6:1 payoff on a put spread. With 30-year yields already above 2023 highs and rising 7.6 bps the day of the trade, the conviction translates into added pain for housing borrowers and the federal government, the largest long-term rate-takers.
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