Yesterday we saw some action in February 128 puts in TLT (iShares 20+ Year Treasury Bond, Expense Ratio 0.15%), which are notably out of the money given TLT’s $133 handle this morning, but interesting trading activity nonetheless.

With TLT showing a yield of 2.67% with yield dropping nearly every single day in the 2015 trading year thus far in January, this is the first decent options activity we have seen in the name for quite a while. TLT has had a prosperous 2015 thus far in terms of fund flows, pulling in nearly $300 million via creation activity since the beginning of the month.

TLT is among some of the “Government Bond” focused ETF giants in terms of its overall heft and asset size, registering in at about $6.97 billion last. The fund has been around since July of 2002 and now averages about 7.6 million shares traded daily, as well as seeing often pivotal and important options flows from time to time, which is something that cannot easily be said about the vast majority of listed Fixed Income ETFs.

“Shorting U.S. Treasuries,” i.e. speculating on lower bond prices and thus higher yields, has been a very popular trade at times for the greater part of the past five plus years, but looking at where TLT is currently, it is easy to see the uphill challenge that Bond Bears have had over time here. In spite of poor performance, inverse long duration bond funds such as TBT (ProShares UltraShort 20+ Year Treasury Bond, Expense Ratio 0.95%) and TMV (Direxion Daily 20 Year Plus Treasury Bear 3X, Expense Ratio 0.95%) have net pulled in several hundred million apiece in terms of new asset inflows in the trailing one year period, as it appears that some are still
holding out with their short bond positions and hoping for a reversal in bond prices and thus a hike in yields that has some staying power.

TBT for example is trading with a $41 handle this morning and it actually neared $60 back in mid-late September of last year to put it in perspective. It should also be noted that TBT and TMV are designed as short term daily levered trading vehicles, although judging from asset flows over time it appears that some have been using the products for longer periods of time and holding the positions.

On this note, Bond Bears also have shown interest in TBF (ProShares Short 20 Year Treasury Bond, Expense Ratio 0.95%) which is an unlevered inverse play on the same benchmark that TLT tracks. This fund at $933 million in AUM is nearly three times larger than TMV ($348 million in AUM), but it lags TBT in terms of size ($2.6 billion in AUM). TTT (ProShares UltraPro Short 20 Year Treasury Bond, Expense Ratio 0.95%) is ProShares
answer to the 3X TMV that was launched in 2012.

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