Cardano, the sixth largest crypto asset by market cap, is now available to trade on tastyworks. Here’s what you should know.

Product Review: TLT

Jul 9, 2015

By: Tom Preston

If you want to trade US Treasury bonds but don’t have a futures account and want something easier to work with than physical bonds, TLT is an exchange traded fund (ETF) that’s a great product for active traders and long-term investors.  I’ve traded TLT shares and TLT options thousands of times since their introduction in 2002 because of their liquidity and flexibility to create strategies.

TLT’s portfolio is actual US Treasury bonds with an average maturity greater than 20 years.  That means TLT responds to changes in interest rates similar to the way the 30-year Treasury bond does.   It also means that unlike some other ETFs like VXX (the volatility ETF) or USO (the crude oil ETF), TLT does not hold futures.  TLT  doesn’t have to roll the futures from one expiration to the next, and incur a profit or loss on that roll, like VXX and USO do.  The ETFs with portfolios made up of futures can have significant “drag” and tracking error due to the rolls.  TLT doesn’t have that.  

TLT pays a quarterly dividend, which is composed of the cumulative coupon payments of the Treasury bonds in its portfolio.  So, you’ll have to monitor in-the-money call options ahead of the ex-dividend date.

Don’t be put off by what can look like wide bid/ask spreads in TLT options.  Open interest is very high, and if you enter limit orders in between the bid/ask spread you have a good chance of getting filled there.  In my own trading, I get about 40% of my TLT option trades filled at the “mid” or average of the bid/ask prices, and the other 60% .01 away from the mid. That keeps slippage very low.

TLT options have weekly and regular expirations and .5 difference between strike prices.  That combination gives you a lot of flexibility to create trades that are fine-tuned to how you speculate on the direction of bonds, and to keep the risk and capital requirements of those trades low.  

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). tastytrade is a trademark/servicemark owned by tastytrade.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.

© copyright 2013 – 2021 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.