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Traders reach for protection in all sorts of places

As investors braced for a Brexit decision on Thursday, many turned to the 20-year Treasury bond ETF, the TLT, with anticipation of a drop following a decision by the U.K. to not leave the EU.

That was clearly not the case.

The U.K.'s vote to leave sent a sonic boom through global markets as the S&P had its worst open since 1986 and the British pound touched a 30-year low. However, in the early stages of Friday's session, the TLT was up nearly 4 percent.

"The TLT was trading at nearly twice its average daily put volume," explained Optimize Advisors' Mike Khouw on Thursday and highlighted a $4 million bet against the ETF. "What we saw was a big buy of 13,500 of the September 131 puts for $2.85."

While early, the trade is not working out. The TLT would need to drop over 3 percent to $128.15 by September expiration to net the profits. But, the whole transaction does illustrate how traders are looking to options on the TLT to hedge so-called Brexit risk.

"That's clearly a bet that rates would be higher and the U.S. Treasury bonds would be lower," said Khouw, who also believes that bet was directly correlated to an expectation that the Brexit was not going to happen.

Still, it may not have been a total loss.

Khouw separately noted that another trader wisely purchased 15,000 weekly $136 calls in the final minutes of trading on Thursday. By 11:10 a.m. on Friday, the TLT hit $136, bringing the buyer around $400,000 in profits.

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

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