Options that go up or down in value based on interest rate changes are known as yield or interest rate options. These contracts can be traded based on the value of investments like T-Bills, T-Notes and T-Bonds.
Interest Rate Bond Option Contract
If an options trader feels short term or long term interest rates will be changing, they can profit by using bond or yield based option contracts.
As with any options investment, these should only be for experienced investors. Although these contracts are based on safe treasury securities and bonds, the call or put contract itself can still expire worthless and your premium will be lost.
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