Options Trading News

December 11, 2012  Tue 3:16 AM CT

The iShares High-Yield Corporate Bond Fund is near multi-year highs, but a large trader apparently believes that further upside will be limited.

optionMONSTER systems show that a trader sold 5,000 March 93 calls for the $1.20 yesterday. Open interest in the strike was 1,126 contracts at the beginning of the session, so this is a new position.

The call selling is a bet that the HYG will continue to run into resistance around that $93 level. The options could have been sold naked with an initial bearish bias or traded against long shares as a covered call. (See our Education section)

The HYG rose fractionally yesterday to close at $93.29. The exchange-traded fund bounced off support near $90 three weeks ago. Resistance around $94 has been in place since June 2008, with a four-year high coming in right around that level in mid-September.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »