He said that options premiums are quite elevated relative to their historical levels and the spread between implied volatility and realized volatility is pretty wide. This means that options are overpriced or that options are telling us that there is some danger ahead for people who hold long term U.S. Treasury. Khouw believes it is the latter and he wants to take a short position in TLT.
Khouw wants to buy the January $155 put for $2.50. The trade breaks even at $152.50 or 5.51% below the closing price on Friday.