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January 4, 2013  Fri 9:28 AM CT

HYG: SEE CHART GET CHAIN FIND STRATEGIES
The iShares High-Yield Bond Fund is trading in step with the S&P 500 while a put trade tops the action.

optionMONSTER systems show that a trader bought 2,400 March 92 puts for $1.20 against open interest of more than 8,000. At the same time he or she sold 5,000 March 89 puts for the bid price of $0.45 in volume that was above that strike's previous open interest of 3,264, so that was a new position.

This could be an unusual roll higher, but it is more likely a new put vertical. That would cost the trader $0.30, which would be at risk if shares remain above $92. The maximum gain for this ratio spread would come if the HYG is around $89 at that expiration. (See our Education section)

The HYG off 0.09 percent at $93.84 this morning, a day after reaching its highest level since July 2008. The exchange-traded fund hasn't seen the $89 area since it came off 52-week lows back in June. The HYG typically has a high correlation with the S&P 500, and it is now at 0.95.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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