Bloomberg has highlighted the growing popularity of TLT and its options.
Indeed, open interest—the number of outstanding options contracts—has nearly doubled since the beginning of 2023, while it has remained unchanged for SPY.
Bloomberg cites the more significant movement of TLT relative to its implied volatility (IV) as a reason. This means you can buy options cheaply and benefit from the movement. In contrast, SPY’s realized volatility has consistently been lower than even its low IV.
However, if you look at the chart showing the difference between realized and 30-day implied volatility (I used their 10-day moving averages), you can see this trend is coming to an end. Since the March expiration, TLT has been trading almost as sluggishly as SPY.
Nevertheless, we are soon to face new rounds of speculation about interest rates—which means significant fluctuations and a decent rise for TLT and TMF when a rate cut decision is made.
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