HOW TO PLAY IT

Those over-thecounter curve options used by Quadratic are not available to small fry, but there are other ways to speculate on interest rates. You could, for example, own put options on the iShares 20+ Year Treasury Bond

ETF, a directional bet that would pay off if the rate on long-term Treasurys goes up. To get the same rate sensitivity as you’d see on $100,000 of long bonds, at-the-money puts would have to cover 1,500 shares of the ETF. The put expiring October 18, with a strike price of $145, was recently quoted at $335 (ask) per 100-share option contract. Randy Frederick, Schwab’s options guru, recommends using a limit order when you place the trade. The $5,040 price tag for 15 contracts would include $15 of commission and $75 of marketmaker add-on built into the ask price.