TLT - TMV: Efficient Hedge And Income Play For Volatile Long Bond Market

2024-05-01 12:33:36 ET

Summary

• TLT is risky due to volatility in the current market, TMV offers a reasonable choice for hedging against TLT long holdings.
• TMV is a daily inverse triple for TLT, with triple the volatility. It could perform well in the near term while it may also pay good dividend.
• Actively managing TMV trades involves monitoring volatility, using it as a hedge, and selling covered calls for extra income.

Introduction

Holding the iShares 20+ Year Treasury Bond ETF ( TLT ) can be risky due to the volatile long bond market. In fact, TLT historical volatility is at the similar level to the equity market like S&P 500 index. To protect such risk, Direxion Daily 20+ Year Treasury Bear 3X Shares ETF ( TMV ) offers a reasonable choice as it is designed for hedging purposes. In addition, TMV also offers dividends, which can add to the income sources....

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