Novice Trade: TLT

Bond premiums are straight up too cheap in bond ETF options and in bond futures options. Especially at the long end of the curve. There is potential for real movement in interest rates at the back end of the curve depending on what the Fed says and does tomorrow. Additionally, if the market reacts one way or another to the Fed then bonds might move as well.

Given that, there are really two scenarios: the Fed is super hawkish and bonds rally because the world is scared; or the Fed is dovish or somewhat dovish and bonds rally because the Fed is dovish. Thus, I think in the next few days we could see the back end of the curve move back toward a 10-year yield of 1.80%-1.85%....39 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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