Using a TLT call credit spread for income because I can’t refinance at these long rates.
I don’t need yields to rise. I need them not to fall \~100bp. TLT is $81.87. Duration is \~15, so 100bp lower on the long end is roughly TLT into the mid-90s. That’s about the move that would make a refi real for me. Until then I’m stuck with the mortgage, so I’m getting paid to wait.
Trade (from the Nov chain today)
• TLT $81.87
• Sell 20-Nov-26 85 call / buy 20-Nov-26 90 call
• 80 DTE
• Credit $0.50 ($50 per)
• Width $5
• Max profit $50
• Max loss $450
• BE $85.50
85 is \~+3.8% (\~25bp). 90 is \~+10% (\~65bp). Full 100bp / \~$94 is still outside the long strike. If rates never come down enough to refi, I keep the credit. If they drop hard enough that a refi is actually on the table, this can already be at max loss before TLT gets to $94.
I looked at 90/94 on the same expiry. Credit is only \~$0.08–0.09. Not worth it for “can’t refi so I want premium.” Nov IV on TLT is \~11–12%, so you don’t get paid for being that far OTM.
Defined risk only. Not short TLT, not naked calls.
Management
• Take it off around $0.25 (half the credit)
• Don’t hold the last week if it’s close
• Size off the $450 max loss
Questions:
1. Is pairing “can’t refi unless long rates drop a lot” with this 85/90 a reasonable way to get paid while I wait, or am I just selling cheap TLT vol and dressing it up as a mortgage story?
2. For the same idea, would you sell closer (83/88, more credit) or farther (88/94, less credit, closer to the 100bp line)?
3. Anything dumb about Nov vs pushing it to Dec?
Not advice. House first, options second. Want the structure kicked before I size it.