iShares Long-term Bond Fund (TLT) loses $1.36 to $122.19 as longer-term Treasurys slip ahead of tomorrow’s FOMC announcement and after a German court ratified the European Stability Mechanism. The euro moved above 1.29 against the buck and is notching 5-month highs. The move out of safe haven investments and into riskier assets is weighing on Treasury bonds. Options on TLT are busy as well., 123,000 puts and 19,000 calls so far. The top trade is a spread, in which in-the-money Sep 124 puts were apparently being sold on the bond fund at $2.44 per contract, 33000X, to open a new position in 48500 Oct 122 puts for $2.51 per contract. It appears to roll positions opened in late-August, which included buyers of Sep 124 puts for $1.84 per contract when TLT was near $125 (see 8/23 color). Open interest in Sep 124 puts on TLT is 42,226 contracts and the largest position in the name. 40,930 have traded today. More than 60,000 Oct 122 puts have traded against 2,211 in open interest. Overall, the rolling to October at-the-money puts seems to express the view that further losses in Treasury bonds is likely over the next five and a half weeks.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.