To The Moon

$3倍做多20年期以上国债ETF-Direxion(TMF)$ is an ETF which is daily 3X $20+年以上美国国债ETF-iShares(TLT)$.

I am not really bearish on US Treasury bonds. Actually, I have sold TLT puts, as I mentioned before, Treasury bond bottoms are certain, and selling puts can be a good choice for a while.

But TLT rose as much as 10% in November and it was one of the most crowded trades. It continued to rise in December. If I keep selling TLT at a safe exercise price, the premiums will be little. If I raise the exercise price of selling puts to $90, I don’t think it is safe. Since long-term U.S. bonds do not have such an increase, TLT has room for correction.

I am willing to sell TLT puts at an exercise price of $87-89. I think it should correct to around $90 in the short term.

Why do I sell TMF calls？

First, I think a correction to TLT is around the corner. However, if I sell TLT calls at a safe exercise price, such as $100, the premium is too low.

Suppose I choose a longer expiration date. As I mentioned above, Treasury bond bottoms are determined. The short-term TLT rise too much does not mean that it will not continue in the medium and long term, so selling calls expiring next year is not a good idea.

Second, TMF is a daily 3X leveraged ETF that tracks TLT. It has a better premium to sell calls, as it has more volatility and a higher IV .

Furthermore, TMF is a leveraged ETF, and there is a natural loss in the daily rebalance. Even if the option is exercised as a short-term surge, the price will fall back with the loss, so selling a leveraged ETF call is more reliable.

I sold TMF calls on the day TLT jumped to $95. Due to the leveraged ETFs surge on the day and the rise in IV, the premium became more substantial. TLT continued to rise to $96 a day later. My sell calls position made a slight loss, but it was only for one day.