TLT Long Put Spread

Debtors are popping champagne (paid for with credit cards) as the yield curve got even more inverted yesterday, with the 10-year yield dropping to its lowest level since 2017. The 10-year is the benchmark for a lot of rates, like credit cards, for example, and that’s good news for borrowers. Since the Fed indicated that there would be no more rate hikes for a while, TLT has rallied sharply. But if all that news is baked into the price of TLT, how much higher can it go? The contrarian trader could consider a bearish strategy here, and despite TLT’s IV rank at 51%, debit spreads are still attractive opportunities. The long put vertical that’s short the 124 put and long the 127 put in the May expiration with 52 DTE is a bearish strategy with a 54% prob of making 50% of its max potential profit before expiry and that generates $.13 of positive daily theta.

This Trade Is

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