Range-bound play on corporate bonds
Chris McKhann | email@example.com
The HYG exchange-traded fund trades at $87.92, up 0.37 percent on the day. It has tumbled in the last week, having traded above $91 last Friday and losing every day since. The correlation between the HYG and the S&P 500 is usually high and today stands at 0.97.
More than 26,000 HYG options have changed hands today, compared to a daily average of 4,200. The action is almost entirely in one combination trade.
More than 10,000 each of the June 85 puts and 89 calls have traded, both well more then open interest, according to optionMONSTER's systems. This combination involved 9,900 puts sold for the bid price of $0.60 and the same number of calls sold for the bid price of $0.45.
This short strangle position takes in a total credit of $1.05, which means that the position can profit with the HYG between $83.95 and $90.05 at expiration. The maximum profit comes between the two strikes. (See our Education section)