It was the best of trades, it was the worst of trades… a tale of two financial ETFs, one of which (TLT: 20-Year Treasury ETF) is a consistent source for good options trades, and the other (TBT: 2x Inverse Treasury ETF) is a consistent disappointment.
Take a look at the above charts. On the left is TLT, and you can see a pretty clear trend with nice upward-trending support and a few good looking setups. On the right side, TBT, which, even after a reverse split, continues to juke us out of our cleats every time we try to tackle it.
We’ve shown both to demonstrate how two ETFs can be linked to each other. Take a look at them as they trend over time - there’s absolutely inverse movement, and it makes sense that trading one should be a replacement for the other. As it turns out, the available strike prices in TLT and its relative (non-leveraged) consistency have made it an excellent product for trading credit spreads.
We’re looking at $121 as a very solid support level for TLT, and if we were going to enter a new trade in bonds we’d start at that level and move from there.
If you dig this analysis (and the really, really poor joke at the beginning) then give yourself an early Christmas gift and sign up for our Options Strategy Alerts here. 20 on 20 will continue today - enjoy!