Options Traders Betting on Higher Interest Rates

Do options traders see higher interest rates to come? If the call volume in the ProShares Ultrashort 20+ Year Treasury ETF is any indication, the answer is a resounding yes.

The TBT is an ETF that moves inversely to bond prices. The lower bonds go, the higher the price of the TBT. Already today, over 143,000 contracts have traded hands, with calls outnumbering puts by a three-to-one margin.

More disturbingly, these aren't long term bets. Options traders see rates rising now. The December 38-strike saw huge volume, with traders snapping up over 16,000 contracts at roughly a dollar a piece, a bet that pays off if the TBT trades about $39 bucks by next week.

“The three most active options are all Dec expiration calls so not only are traders bullish on TBT but they think the move is going to happen soon,” says Scott Nations, Chief Investment Officer of NationsShares and an Options Actioncontributor.

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