iShares 20+ Year Treasury Bond ETF (TLT), Trending Stock Report

Will the results of yesterday’s election cause the bond market’s pullback to exceed that seen during the worst days of the recent inflation crisis? Will it cause the bond market to decline more than the worst days of the 2008 Financial Crisis? Will we see long-term rates climb faster than the worst days of the COVID Crisis?

The answer options traders are pricing in is YES!

Although we would never rule out any potentiality, the likelihood that Trump’s win will, in the next 8 hours, cause a rout worse than any of those events. Could it happen? Yes. Is it likely? No.

iShares 20+ Year Treasury Bond ETF (TLT) social media mentions are up 533% in the last 24 hours and volatility expectations are extreme to say the least.

This Volatility Term Structure chart for TLT shows us the implied volatility for the at-the-money options for each expiration. The term structure is steeply inverted as investors react to the election results. The highest 0-day option implied volatility on a term structure chart during the worst inflation scare back in June of 2022 reached 41. Today the value is 56. The expectations are insanely high.

The Historical Return Histogram chart shows the actual movement of the ETF relative to the expectations. The highlighted occurances where the ETF dropped more than 3.66% are 6 times in the entire history of the ETF. Only once did the ETF drop more than 6.5% in a single day. That happened during the COVID Crisis. Will today’s action be worse for TLT than it was on its worst day during the COVID Crisis? We don’t think so.

We have one day between the election results and the Fed Chair’s press conference tomorrow. The volatility expectations for TLT today are almost ridiculous. Now, Chairman Powell could say something tomorrow that could affect interest rates in the extreme, but that is tomorrow not today.

Today’s options provide us with another limited-risk, high-probability opportunity using a TLT put credit spread.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.