Dan Nathan Sees Unusual Options Activity In iShares iBoxx $ High Yid Corp Bond (ETF)

On CNBC's Options Action, Dan Nathan said that options volume in iShares iBoxx $ High Yid Corp Bond (ETF) HYG has exploded over the last month. He added that on Tuesday, the options trading volume in the ETF was 2.5 times higher than the average daily options trading volume. There was one bearish trade that caught Nathan's attention. When the ETF was trading around $80, there was a buyer of 25,000 of the January 77/74 put spread in iShares iBoxx $ High Yid Corp Bond (ETF), paying around $0.40 for them. The total premium was $1 million and the break even for the trade is at $76.60 or approximately 4.5 percent lower from the closing price on Tuesday. The trade can maximally make $2.60, if the ETF drops to $74. Nathan thinks that iShares iBoxx $ High Yid Corp Bond (ETF) doesn't have liquidity issues because a huge increase in options interest means that traders are using it as a hedging tool and to make directional bets. The implied volatility in the name still hasn't reached the levels it had during the sovereign debt crisis. Over the last week Nathan noticed a couple of large purchases of short dated put options iShares iBoxx $ High Yid Corp Bond (ETF).