economy

January 9, 2026

Stars are aligning for Treasury yields to fall. This options trade hedges risk and makes money if rates dip

Jeff Kilburg breaks down this trade on the TLT ETF.

Stars are aligning for Treasury yields to fall. This options trade hedges risk and makes money if rates dip

TL;DR

  • The author anticipates U.S. Treasury yields will move lower, specifically the 10-year note falling back under 4%.
  • An imminent Federal Reserve chair appointment is expected, with predictions leaning towards Kevin Warsh or Kevin Hassett.
  • The new Fed chair is expected to align with the Trump administration's goal of lower interest rates.
  • Treasury Secretary Scott Bessent has overseen the vetting process for the new Fed chair, aiming for changes that could lower interest rates.
  • President Trump has directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds to reduce mortgage rates.
  • A specific options trade on the iShares 20+ Year Treasury Bond ETF (TLT) is described: selling an $86 put and buying an $88 call for a net cost of $0.30.
  • The trade positions the investor to potentially own TLT at $86 if the put is exercised, with unlimited upside if TLT goes above $88.

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