How to Trade Treasury Yields With Options

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Why Bonds and Yields Move in Opposite Directions First, let’s do a quick recap on the relationship between bond prices and yields. The relationship can be confusing because they move in opposite directions. Say, for example, the U.S. government issued a Treasury bond for $100 that pays 4% interest. The buyer receives $4 a year. Then interest rates rise. As a result, newly issued bonds might now offer a yield of 5%. Investors can buy a new $100 bond paying $5 a year. Naturally, investors won’t be willing to pay the same price for the lower-paying 4% bond when newly issued bonds offer a higher return. So its price falls, increasing the effective yield to a new buyer and making it more competitive with prevailing rates. Note that the reverse applies when interest rates fall. If new bonds are paying 3%, for example, a 4%-paying bond is even more attractive, which pushes its price higher. This inverse relationship is fundamental to understanding the bond market – and how we go about our trades. Tune in to Trading With Larry Live Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Visit us on YouTube to catch the latest! Turning a Yield View Into a Trade One way you can trade your view on Treasury yields is through a futures account. But there’s another method that’s much more accessible and straightforward. What’s more, it enables us to tightly control our risk. I use an exchange-traded fund (ETF) – such as the iShares 20 Plus Year Treasury Bond ETF (TLT) – that gives exposure to long-term U.S. Treasury bonds. But rather than trading TLT directly, I trade it using options. So let’s look at a simple example. If I think long-term Treasury yields are going to rise, I could buy a put option on TLT, which increases in value when the underlying asset falls. Remember, rising yields mean falling bond prices, which should push TLT lower and increase the value of my put option. It works the other way too. If I expect yields to fall, I could buy a call option. Falling yields should push Treasury prices (and TLT) higher, increasing the value of our call option. This strategy also another advantage. Because I’m buying the option rather than the underlying ETF, my maximum risk is defined from the outset. No matter how far the trade moves against me, the most I can lose is the premium I paid for the option. That gives me a simple way to trade Treasury yields in either direction while keeping my risk firmly under control. Happy Trading, Larry Benedict Editor, Trading With Larry Benedict Get Instant Trade Alerts on Mobile! Click the icon below from your mobile device to download The Opportunistic Trader app today for one-tap access to trade alerts, issues, and model portfolios for all of Larry’s services. Available in the app store on Android and iPhone. More stories like this Read the latest analysis on hot growth stocks, and market-moving developments The Fed Rate Bet Traders May Regret Markets are convinced the Fed won't hike in September. Here’s why a month of data could flip that bet – and where the real trade is… Aug 18, 2026 • 3 min read How Delta and Gamma Move Your Options Trade The stock moves, but your option barely budges. Delta and gamma explain why – and why gamma goes wild as expiration approaches… Aug 17, 2026 • 3 min read Patience Paid Off on Our EUR/USD Trade We closed a long EUR/USD position for 189 pips. Here's how the Fed, a yen intervention, and an RSI signal set it up… Aug 14, 2026 • 4 min read 1125 N Charles St, Baltimore, MD 21201 www.opportunistictrader.com To ensure our emails continue reaching your inbox, please add our email address to your address book. This editorial email containing advertisements was sent to penunggangbadai.moneyblog@blogger.com because you subscribed to this service. To stop receiving these emails, click here. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us here. © 2026 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. Privacy Policy | Terms of Use

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