Trader bets on more pain for bond market

Bonds sold off again on Friday as jitters over the crisis in Greece and Chinese stock market eased.

The TLT, the ETF that tracks longer-dated bond yields, was down more than 1.5 percent during Friday afternoon trading, while the S&P 500 was more than 1 percent higher. And according to one trader, the bond market could continue to fall over the next several weeks.

"I think the broader market is beginning to stabilize here," technical analyst Todd Gordon said Friday on CNBC's "Trading Nation." Gordon's cause for concern stems from the recent bounce back in Chinese equities and a strengthening euro. "A decrease in volatility in U.S. stocks will put pressure on the bond market," he said.

Looking at a chart of the TLT, Gordon noted that the ETF has broken key support and is approaching its year-to-date low of $114.88, hit in late June. The ETF is currently trading more than 16 percent lower than its 2015 high of $138.50. "I think we look set to move to the downside and retest that old low," said Gordon, founder of TradingAnalysis.com.

But rather than make an outright bearish bet, Gordon turned to the options market. But rather than using puts to bet against the TLT, Gordon sold calls. Specifically, he sold the August 119/120 call spread for 35 cents. In this trade, Gordon sees profits if the TLT stays below $120 by August expiration.

"This strategy will allow me to profit if the TLT moves slightly higher, sideways or straight down in the next month," he added.

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