The big bet against the bond rally

The incredible bond rally continues, and it's taking the iShares 20+ Year Treasury Bond ETF along with it. The TLT ETF hit yet another all-time high on Wednesday, as bond prices rise and yields sink.

But one trader seems to think it's time to look the other way.

And in a big trade on the instrument Wednesday, one trader bought 40,000 February 128-strike puts for 76 cents per share, laying out a total of $3 million in options premium.

This trade will make money if the TLT falls below that $128 strike price by more than the 76 cents being laid out—or below $127.24 within a month's time. That's a 4.2 percent drop from Wednesday's closing price.

Read MoreCharts show shocking news on Treasury bonds & USD

"To me, this is one way to make a cheap—in premium terms—bet that rates are actually going to go higher after such a big short term move," Dan Nathan of RiskReversal.com commented Wednesday on CNBC's "Fast Money."

Of course, trading against a trend can often prove difficult. And in fact, at the same time the trader bought these puts, they sold 40,000 February 123-strike puts that they had previously acquired, according to Nathan. As the TLT has rallied, the value of those puts has fallen significantly, and on Wednesday, they were worth just 15 percent of their value at the end of 2014.

As of 9 a.m. EST Thursday, the TLT was projected to open just about where it closed on Wednesday, despite currency movements by the Swiss Bank's removal of its cap on the franc against the euro.

Follow the show on Twitter: @OptionsAction.

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  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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