Should I Buy TLT call options (August 21st, $85 strike, selling $87 calls) (TLT)? Finance YouTuber Analysis

The YouTuber is buying a call spread on TLT, anticipating that the ETF will rise above $87 by August 21st due to easing Fed rate hike fears and upcoming inflation data. This strategy offers a high potential return (115%) for a defined, small risk, reflecting strong conviction in the short-term market mispricing.

“Right now, I can go to the options and I'll use the August 21st options here, which is going to include good inflation news in July and August, as well as that July Fed meeting. buying the call options at the $85 strike price cost $154. But I can offset some of that by collecting 61 cents for the $87 call options for a total cost of just 93 cents each. That means if the TLT ends above $87 by expiration, spread is going to be worth $2 each for 115% profit in just 6 weeks.”

This is a safer call spread strategy on TLT, targeting a close above $86 by August 21st. It offers a lower but still significant return (70%) with more downside protection compared to the more aggressive $85/$87 spread, based on the same thesis of easing Fed rate hike concerns.

“A safer but still good return could be buying the $84 call options for $2.16 while selling the $86 calls for 99 each or a total cost of just $1.17 per share. That would bring the return potential down to 70%. But the TLT only has to close above $86 for it and you have a lot more downside protection.”