Yesterday we saw heavy put buying in TLT, the iShares Barclays 20+ Year Treasury Bond ETF as 5,000 October 122 Puts traded on the ask for $2.52. This bearish activity follows the recent news that Bill Gross cut his Treasury bond holdings to 21% from 33% of his Total Return Fund, the world’s largest bond fund. The way we are trading treasuries is to replace a long TLT position with a short out of the money, long dated put. This gives us exposure to fixed income and locks in an entry price we are happy with if TLT continues to experience short term weakness.

Yesterday we also noticed heavy call selling in GLD, the SPDR Gold ETF. 12,000 GLD September 161 calls were sold below the bid for 7.125, and 12,000 GLD September 166 calls were sold below the bid for $3.25. Price action in GLD will be sensitive to the outcome of the Fed meeting, and this trade appears to be a trade positioning himself to profit from a “buy the rumor, sell the news” scenario. We remain long term bullish on gold but are keeping all long positions hedged with a short call to protect ourselves from short term weakness after a strong rally the past few weeks.