There’s an old Wall Street adage: “Stocks float in a sea of bonds.” Option traders are expecting the tide to ebb.
options trader iShares 20+ Years Government Bond ETF (TLT)an ETF that tracks long-term bonds, has been buying bullish calls for most of the summer, and that continued Tuesday. Traders bought more than 175,000 calls on the fund during the session, compared to just under 40,000 puts, according to ThinkOrSwim data.
Long-term Treasuries are bearing the brunt of the first rise in yields in nearly a year, hitting a 19-year high in three decades after Treasury Secretary Scott Bessent increased bond purchases last week. However, the 10-year yield remains below its highest since January 2025 and below the 5% level reached in 2023.
At least one major trader in TLT appears to think long-term bonds could spark a big rally. Hours after the opening bell on Tuesday, someone bought 10,000 85-strike calls on TLT expiring on Nov. 20 for $1 million and sold 15,000 90-strike calls expiring on the same day for $375,000. Call spreads are bullish, with maximum payouts increasing 8% to levels not seen since March. Rising TLT means lower long-term government bond rates, a welcome development for stock investors.
iShares 20+ Year Treasury ETF (TLT) YTD
The fund added nine-tenths of a percent to $83.30 on Tuesday, its highest level since July 29. Corporate bonds also performed well. iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) Added 0.5 percent.
Investors have a busy week ahead. PCE, the Fed’s recommended inflation measure, will be released tomorrow morning, Nvidia will release its financial results after bell on Wednesday, and the Jackson Hole Economic Policy Symposium will begin on Thursday.
