finance
HYG Options See Five Times More Puts Than Calls as Traders Buy 20,000 January 75-Strike Contracts
Options activity in the iShares iBoxx High Yield Corporate Bond ETF showed heavy bearish positioning. Traders paid $1.3 million for one large put package while crude prices hit lows not seen since March.
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Options traders placed heavy bets against the iShares iBoxx High Yield Corporate Bond ETF on Thursday. 3 million for 20,000 January 27 75-strike put contracts. Put volume reached five times call volume, with 190,000 of the 226,000 total HYG options traded that day being puts, according to ThinkorSwim data.
The most active contract by volume was the 77-strike put expiring August 21, with 40,000 contracts changing hands. Those contracts traded at 39 cents each, requiring the ETF to fall another 4 percent before buyers would break even. Market participants linked the activity to two developments.
New Federal Reserve Chairman Kevin Warsh held his first meeting, shifting attention away from the long-standing policy script that had guided bond traders for the previous 20 years. Zed Francis, chief investment officer and co-founder of Convexitas in Chicago, said traders “were just told they’re going to have to do their homework again.
U.S. And Iran agreed to a peace deal. More than 11 percent of the HYG ETF is invested in the energy sector, according to iShares.
