Bond Market Squeeze Incoming? Why $TLT can rally!

Option Volume: The total contracts traded for an option.

Delta: A measure of how an option price moves in relation to the underlying asset. Calls have positive delta (move with the stock), while puts have negative delta (move inversely).

Imbalance: The difference between buy and sell orders in the market.

Negative Delta Imbalance: More selling of options that contribute to an overall negative delta.

A large negative delta imbalance suggests increased put buying or call selling, typically indicating bearish sentiment.

Conversely, selling puts and buying calls would create a positive delta imbalance, signaling bullish sentiment.

Market makers may hedge by selling the underlying asset, further driving down its price.

For Stocks: A strong negative delta imbalance suggests traders expect a decline or are hedging against a drop.

For Market Makers: They may need to short the underlying asset to stay delta-neutral, increasing downward pressure.

For Traders: Tracking delta imbalances can offer insights into market direction and potential reversals.

If $TLT moves toward key levels like $91.35 or $93.35, traders may consider selling cash-secured puts at strike prices of $87 and $86, collecting a premium of $2–$3 per contract with a 6–7 month expiration. Here’s how to structure the trade:

When selling cash-secured puts, the margin requirement is calculated as:

Strike price × number of shares (per contract) - premium collected.

If assigned, you may need to purchase 1,000 shares per contract.

Example Calculation:

$87 strike: Requires at least $87,000 in margin.

$86 strike: Requires at least $86,000 in margin.

With 10 contracts at each strike, you need at least $86,000–$87,000 in available margin.

Selling at a $2 premium per contract yields $20,000.

Selling at a $3 premium per contract yields $30,000.

This offsets the capital requirement, reducing cash tied up in the position.

If you already hold $100,000 in $TLT, you may use it as margin. Otherwise, you’ll need approximately $57,000–$67,000 in liquid cash after factoring in the premium collected.

If borrowing funds, IBKR’s margin rates apply:

Below $100,000: ~2.5%-3% annually.

Above $1,000,000: ~1.5%-2% annually.

For example, borrowing $60,000 at a 2.5% rate would incur an annual interest cost of $1,500.

If assigned, sufficient cash must be available to purchase shares at the strike price.

Longer expiration puts (6–7 months) mean exposure to interest rate fluctuations and volatility shifts.

If TLT drops significantly, rolling the position or adding collateral may be necessary.