Waste of money. Notice the March 2023 banking ordeal shot TLT to $110. We’d have to suffer a YUGE problem for TLT to get to $125 by Feb 2025. I think odds are against you.
If it were me, and I wanted to leverage Treasury duration, I’d buy closer to ATM calls and/or go much further out in time. Or I’d long a strip (zero coupon) treasury ETF instead, or I’d go with the leveraged ETF TMF, or I’d open 1-2 year out synthetic longs (long call, short put, roughly costless). All of these have problems, such as time decay, but more likely to not lose than your low delta 6 month out calls.
Landslide_Micro on
I would not buy calls for bond etfs…I don’t expect any rapid change in red rate
BallsOfStonk on
We’d need to see like 2.5% worth of cuts to get there.. do the math on that by 2/21/25.
SupurSAP on
That’s a lotto aka its probably going to 0 if you hold to expiration. Only way you make anything imo is if the VIX shoots back up to recent highs in next 30 days and vega climbs.
Why do I see it as a lotto? Thinking below:
Have you looked at the last time TLT was at your strike price? What were fed funds at then? How many bps of cuts are needed to get back to a similar fed funds level of then from where we are now?
What does the CME FedWatch tool have priced in / probability wise worth of cuts for the upcoming FOMCs between now and expiration?
Just my thoughts.. only been trading for a little over a year.
6 Comments
I woulda bought them further out probably…
One of the bets of all time
Waste of money. Notice the March 2023 banking ordeal shot TLT to $110. We’d have to suffer a YUGE problem for TLT to get to $125 by Feb 2025. I think odds are against you.
If it were me, and I wanted to leverage Treasury duration, I’d buy closer to ATM calls and/or go much further out in time. Or I’d long a strip (zero coupon) treasury ETF instead, or I’d go with the leveraged ETF TMF, or I’d open 1-2 year out synthetic longs (long call, short put, roughly costless). All of these have problems, such as time decay, but more likely to not lose than your low delta 6 month out calls.
I would not buy calls for bond etfs…I don’t expect any rapid change in red rate
We’d need to see like 2.5% worth of cuts to get there.. do the math on that by 2/21/25.
That’s a lotto aka its probably going to 0 if you hold to expiration. Only way you make anything imo is if the VIX shoots back up to recent highs in next 30 days and vega climbs.
Why do I see it as a lotto? Thinking below:
Have you looked at the last time TLT was at your strike price? What were fed funds at then? How many bps of cuts are needed to get back to a similar fed funds level of then from where we are now?
What does the CME FedWatch tool have priced in / probability wise worth of cuts for the upcoming FOMCs between now and expiration?
Just my thoughts.. only been trading for a little over a year.