What's behind call sale in bond ETF

optionMONSTER

Call selling topped yesterday's option activity in the iShares High-Yield Bond Fund.

optionMONSTER systems show that 10,000 October 92 calls were sold in one print for the bid price of $0.46. It is clearly a new position, as the volume was almost 10 times the open interest in the strike before the trade appeared.

These contracts were very likely sold against long shares in covered-call position , which is bullish up that $92 strike price but not beyond. The trader sees the HYG staying below $92 through expiration in mid-October. If it does rally above that level, he or she will face the obligation to sell shares at that price. (See our Education section)

The HYG was down fractionally yesterday to $91.13. The exchange-traded fund hit a high of $96.30 in early May and bounced off support around $90 at the start of this week.


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