Can this be a 10 times money opportunity?

I talked many times about the COT report, which presents the future traders' bets virtually for anything. Understandably, it moves around a lot but when it hits to some extremes, you better pay attention to it as it is often a contrarian indicator to suggest a change in the direction is likely to come soon. It is not necessarily so much punctual in terms of timing but it is a quite reliable leading indicator for directional trades. We now see another extreme COT indicator flashing. It is about bonds.

Bonds are supposed to be slow moving animal. A 10% move in a year is very reasonable but 15%+ in just a couple of months? Very rarely seen to say the least! This is what has happened for the long term bonds (TLT), which is being chased by Pops and Moms with their hand and feet right now. Not only ordinary people, it is also chased by the professional traders as indicated by the COT report. A couple of weeks ago, we saw a bullish bet reaching to an extreme rarely seen for years. In fact, we have only seen this level of bullishness 3 times before, in  2013, 2016, and 2017. Now this is important for you to know what had happened each time afterwards.  Each time such kind of super bullishness had led to losses in bond prices going forward and BIG TIME. In average we can easily see a 15-20% loss for bonds in the months ahead, if the same pattern plays out. I have little doubt this time is no difference!

So armed by the historically data with technical analysis, let me make a bold call now: I expect the next major move for the long term interest is not down (the hot idea right now) but up and probably a lot higher from the current very depressed level. For the 10 year Treasure with a yield less than 1.5% at its low recently, I bet we may see 2.5-3% in the next 6-12 months. I know it is not something most people will agree with me but as a contrarian, I don’t need such a consensus to comfort me. With that, TLT has to substantially go down, probably 20% lower from the current level around 140ish. For option savvy traders, this could be a 10 times money opportunity if lucky enough. Of course, I could be wrong but we have already started to see the downward moves for TLT in the past week. Likely it will try to bounce back but then a more pronounced leg down will follow. That's my bet.

Be aware, options are wasting assets and are quite risky to play with as their time premium will decay very quickly with time, if the trend is against you. So don’t play with it if you are not good at it. I personally will be looking at a much lower strike price in at least a 6 months or longer duration and with some hedged strategy to minimize my risk. The easiest play for the idea is TBF or more risky TBT. Just be mindful of the risk with appropriate position size and exit strategy.