Buying TLT put contracts.
TLT is an ETF that tracks long-term treasury bond prices. As long-term interest rates start to move higher, prices for these bonds are naturally breaking down. 2022 will likely be the year interest rates really take off as the Fed attempts to contain rising inflation. And after a 40-year bull market for bonds, the reversal could catch many traders completely off-guard.
The February $149 put contracts are in the sweet spot for our in-the-money option approach. If TLT breaks continues lower as expected, we should get about a 1-for-1 price movement for the price of our put contracts. And if TLT rebounds from this level, the time premium and volatility for these contracts should help to mute potential risk.