Trade of the Week: High Yield Bonds

Bonds, Options, Videos

The market continues to be ultra-volatile due to serious concerns over the global economy in the wake of the coronavirus. High yield bonds (aka junk bonds) tend to sell off during times of high stress as investors move to the safety of government bonds instead.

This past week, someone bought a one-week put spread in iShares iBoxx High Yield Corporate Bond ETF (HYG), an extremely popular product for trading the junk bond market. The put spread will make money next week if HYG drops below $80. The trade stands out because it was a 5,000-lot block trade with HYG at $85 – and it doesn’t tend to move that much under normal circumstances.

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I woke up to this message in my inbox on Feb 20th when our E*Trade option skyrocketed 1,420% in 9 days. One member profited $43,000 literally overnight. We then closed on WMT for a quick 178% gain and then XLB for 222%. I'm sending out these opportunities every month. Click here to see what to do to get my next trade.