Back Derivatives Strategy

Buy Aug 1st TLT Puts Ahead of Several Potential Catalysts

Published on July 25, 2025

Jeff Jacobson

Tying into our note that we could see a lower Urate on the Aug 1^st payroll report (here), I like the risk/reward of buying “cheap” puts in TLT. Just looking at all the payroll reports YTD, there has been a decided bias to the downside in bonds (TLT) with a move lower on 6 of the 7 reports. In fact, the only positive reaction was in April, but that likely was more of a risk-off move as we were in the middle of the tariff meltdown. On the last three payroll reports, TLT has been down each time with an average decline of just over 1% (with SPX rallying an average of 1% on those three reports as well). In addition to the Aug 1^st payroll report, I also like that buying those puts now will also capture the FOMC rate decision (and press conference) on 7/30, the PCE data on 7/31 and the ISM data on 8/1. So there is a lot of data that could certainly impact rates over the next week.

Because yields have been range bound essentially since April, TLT vol has continued to move lower. The 20-day realized vol in TLT is now below 11 (it was almost 22 in April) and is now just above the March lows (we saw a sharp spike higher shortly after). Even with all the catalysts I referenced above, TLT weekly put implied vol only trades ~ 13. Therefore, I really favor owning this “cheap” vol via downside puts as either a hedge to rates/duration, or as a limited-risk bearish bet.

Trade:
Buy TLT Aug 1^st 85 puts for .40 (TLT 85.89 ref)

Trade Details:

Buying the 1-week TLT puts ahead of several potential economic catalysts
Have seen TLT trade with a decided downside bias on all but one jobs report in 2025
In the past three months TLT has averaged a 1%+ decline and has been lower on each report
The 22V call that we could see a Urate move down to 4% would certainly impact longer-term yields should that materialize
TLT will go ex-div on Aug 1^st for ~ .32 – so the 85 puts are essentially only ~ 50bps lower and are a 34-delta (as of last night’s close)
A break below the 85 level (July closing lows), could see a quick move to the May lows ~ 83
Low-cost way to express a bearish rate view over the next week as either a hedge or bearish bet (with limited risk)
Please contact me or the 22V sales team for updated pricing and execution capabilities

TLT 20-day realized vol is now below 11 (down 50% from the April highs) and just above the March lows

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AI-generated content may be incorrect.

TLT remains in a clear downtrend. A break below the 85 support level from June-July could mark new lows
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AI-generated content may be incorrect.

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