Markets

Will junk-bond fund get trashed?

One investor is afraid his junk bonds might get trashed.

optionMONSTER's Depth Charge monitoring system detected the purchase of 4,000 December 39 puts on the SPDR Barclays High-Yield Fund for $1.05. An equal number of September 40 puts was sold at the same time for $0.55, but volume was below open interest.

Puts lock in the price where JNK can be sold, so they can be used to insure long positions against a drop. Today's trader apparently closed an existing position in the September contracts and rolled it to December. Making the adjustment cost $0.50 but provided an additional three months of downside protection. (See our Education section)

JNK is up 0.33 percent to $39.50 in morning trading but down 5 percent in the last four months. It's been following a selloff in fixed-income prices overall as investors worry the Federal Reserve will stop propping up bond prices.

Total option volume is more than twice the daily average so far today, with puts outnumbering calls by more than 1,600 to 1.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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