With Permabear Hype in High Gear, Use this ETF to Short Treasuries

NEW YORK (TheStreet) -- The ProShares Ultra Short 20+ Year Treasuries ETF (TBT) is a way to short the 20+ year U.S. Treasury bond at the rate of the change in that daily price at two times the inverse of that change.

Over the past 52 weeks, TBT has traded between $38 and $60. That rather wide price range has been indicative of just how volatile at times the U.S. Treasury bond market has been. And now, perhaps, once again, the Federal Reserve in its infinite wisdom is about to step on the volatility gas pedal, as it must soon decide to raise interest rates -- or not!

While I think that interest rates at this paltry level is beyond surreal, the fact remains that the bond, and especially stock market, are fixated over what amounts to a very small increase in rates. But, who am I to get into the way of permabears trying to scare the crap out of the sheep that follow them? In fact, let the fun begin, and let this current generation have a taste of borrowing money at such uber-high rates of say, 4% or 5%.

Oh, shudder, the fear of that reality as believing savers might actually get a decent return on their cash horde. They are those who have been slapped by the Fed, after first making all that cash, and then hoarding it in their proverbial mattresses for a decade now. Why, they might finally be rewarded for doing so if rates do rise.

Traders prefer, for the most part, to trade where there is price movement (in both directions) and liquidity (so as to get in and out, and maybe in again, using tight bid/ask markets to do so). If so, TBT is one of those trading vehicles that fits the trader's desire as this ETF should find the next several months to be an active period.

The trade tactic I prefer now for TBT is the crisscross strangle (XXS), a tactic which requires movement in price of the underlying in order to become a profitable speculation.

Trades: Buy to open TBT Oct 43 calls and buy to open TBT Oct 47 puts for a net debit of $6.25.

The total capital required for this XXS trade is $6.25. The total capital at risk in this trade is $2.25. The suggested target is $6.80 and the suggested stop loss is a bid of $5.70. AS ALWAYS, this is a guideline and you should always stick to your trading plan and what's best for your risk/reward tolerance.

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TBT Chart
TBT data by YCharts

As always, this is a guideline, and you should always stick to your trading plan and what's best for your risk/reward tolerance.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Skip Raschke writes regularly for Options Profits. You can get his trades first and interact with him there with a free trial.

At the time of publication, Skip Raschke held no positions in the stocks or issues mentioned.

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