We’ve seen quite a move lower in $TLT (which moves inversely to interest rates) since this summer.
Is the bottom in?
My crystal balls says: “Don’t ask me stupid questions.” So, that’s no help.
But here’s what I know:
- Implied volatility priced into $TLT options is relatively high, though declining from recent high levels.
- We have a clearly defined level (of perhaps temporary) support at $133.
- High volatility gives us the ability to short options and gives us plenty of room to be wrong and still make money.
The bet I’m making is $TLT is going to chop around in a bit of a range over the next 2-6 weeks and this will cause volatility to contract.
So here’s how I’m going to play it: