One big investor apparently thinks that the big selloff in junk
bonds is over.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of more than 9,100 December 93 calls in the iShares iBoxx
High-Yield Corporate Bond exchange-traded fund on Wednesday. They
priced for $0.90 and the volume dwarfed previous open interest of
34 contracts at the strike, indicating that new positions were
lock in the price
where investors can buy HYG, which holds a wide variety of
low-rated company debt. Worries that the Federal Reserve will halt
bond purchases caused interest rates to shoot higher in recent
months, causing the fund to drop more than 7 percent between early
May and mid-June.
HYG rose 0.23 percent to $90.82 on Wednesday. It's now back to the
same area where it peaked in early 2012, which could make some
chart watchers believe that it's at potential support and ready to
If it pushes higher, those December 93s will cheaply provide the
investor with upside exposure. They'll more than double from the
fund climbing less than 5 percent, which illustrates the
kind of leverage
that can be achieved with options. (See our
Calls outnumbered puts by more than 4 to 1 in the session,
according to the Heat Seeker
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