Trader sees post-election bond collapse continuing — here’s his plan for cashing in

Bonds tanked after Donald Trump's surprising Election Day win, sending the popular iShares Barclays 20+ Year Treasury Bond ETF (TLT) down more than 4 percent, for its biggest drop in more than five years. And one chart-focused trader is looking for a way to cash in should the move continue.

"This is a vote of confidence for the political situation that we're in, and this is something we want to take advantage of with a potential top in the bond market," he said Wednesday on CNBC's "Trading Nation."

Looking at a chart of the long-term bond-tracking ETF TLT, Gordon sees TLT falling below $120, possibly even lower than $118, which hasn't been seen on the TLT since summer of last year. On Wednesday, the ETF fell as low as $124.40.

As a result, Gordon wants to buy the January 120-strike puts and sell the January 118-strike puts for a total debit of $0.39 per share, or $39 per options contract. If TLT were to close below $118 on January 20, Gordon would see a maximum profit of $161. In other words, if TLT were to fall by another 5 percent in the next two and a half months, Gordon would more than quadruple his money off of the trade.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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