There's an old Wall Street adage: Stocks float on a sea of bonds. Options traders are betting the tide is going out.
Options traders in the iShares 20+Year Treasury Bond ETF (TLT), the ETF that tracks long duration bonds, have been buying bullish calls almost all summer, and the action continued Tuesday. Traders bought more than 175,000 calls in the fund during the session, compared to just under 40,000 puts, ThinkOrSwim data show.
Long-duration bonds are bearing the brunt of a near year-long rise in yields that extended to 19-year highs in the 30-year last week after Treasury Secretary Scott Bessent upped the government's bond buyback. The 10-year note yield however, is still under its high from January 2025 and the 5% level it pierced in 2023.
At least one big trader in TLT seems to think long bonds might stage a significant rally. A few hours after the opening bell Tuesday, someone bought 10,000 85-strike calls in TLT expiring Nov. 20 for $1 million, then sold 15,000 of the 90-strike calls expiring the same day for $375,000. It's a bullish call spread with a max payout 8% higher at levels unseen since March. I move higher in the TLT would mean lower rates for long end treasuries, a welcome development for equity investors.

The fund added nine-tenths of a percent Tuesday to $83.30, the highest level since July 29. Corporate bonds also firmed as the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) added 0.5 percent.
Investors have a busy week ahead of them: the Fed's preferred gauge of inflation, PCE, will be published tomorrow morning, Nvidia reports earnings after the bell Wednesday, and the Jackson Hole Economic Policy Symposium begins Thursday.