The iShares Lehman 20+ Year Bond ETF (NYSE:) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays Capital U.S. 20+ Year Treasury Bond Index. The TLT gives you a way to play the long end of the Treasury curve in a securities account.
The fund generally invests at least 90% of its assets in the bonds of the index and at least 95% of its assets in U.S. government bonds. The underlying index includes all publicly issued U.S. Treasury securities that have a remaining maturity of greater than or equal to 20 years, are rated investment-grade, and have $250 million or more of outstanding face value.
While the Fed has been the buyer of nearly all the longer-dated Treasuries since Operation Twist was announced in September, longer-term rates have actually crept higher since that time. TLT moved up to $124 at the time of the Operation Twist announcement, only to fall back to the present level around $117 in Tuesday’s trading.
Given the unrelenting money-printing now going on both here and overseas, inflation will most likely continue to creep higher, putting a strong headwind in a further rally in longer-term Treasuries.
Technically, TLT has a gap to fill at the $110 level, which was the early September breakout level when rumors of Operation Twist began to rumble in earnest. I’m looking for TLT to head back to $110 by March 2012 options expiration.
Based on TLT’s current market price of $115.72 and using a target price of $110, a target date of March 16, 2012, and $10,000 of investment capital, this is an excellent candidate for making some short-term options gains.
To play this with options, visit , create a free Instant Login and try the TradeBuilder feature. Input the ticker, target price and date, and investment amount, and you’ll see several ways to trade that include selling a March call spread, buying a March put spread, or selling the stock. Best of all, you can see a potential profit-and-loss outline for each strategy.
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