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Today, we’re opening a new bearish trade on iShares High Yield Bond ETF (NYSEARCA:HYG).
The market has been split with a mild bias to the upside over the last few days, which has created a very difficult trading environment. Although we are still bullish in the short term, the risk of a downturn towards the end of the month is rising.
We expect that if stocks start to soften up after Friday’s labor report that any correction will be preceded by a decline in high-yield bonds.
Even if stocks continue to rise, we could see a similar situation to 2016 when high-yield bonds suffered as interest rates and inflation expectations rose. This is also a good hedge against additional weakness in the oil market.
‘Buy to open’ the HYG January (2018) 87 Put (HYG180119P00087000) for a maximum price of $0.75.
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