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High Yield Options Update: 4257 Puts, 4 Calls - Do Stocks Have a 150 Point Implied Downward Vacuum?

Tyler Durden's picture


The shift in risk perception is on. While stock are not quite feeling it yet (they will), today's fulcrum security appears to be high yield debt, as tracked by the JNK ETF. A quick look at the most active options classes page shows something surprising: as of 2:30pm Eastern roughly 4250 puts had trade, compared to.... 4 calls. Yet while investors have certainly turned sour on junk very rapidly, they should be far more bearish on stocks. Not only have stocks outperformaed bonds far more during the QE2 rally (as expected), but a simple correlation model accounting for empirical beta confirms that the SPY is almost 12% rich to fair value as implied by the JNK. Which means that if investors are really bearish on high yield to the tune of 4250 to 4, they should be far more bearish on the stock market.

And, as credit trader points out, comparing the actual and the implied value of the SPY based on JNK trading values, shows a very profound divergence.


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Mon, 03/07/2011 - 16:03 | 1027187 Spitzer
Spitzer's picture

Mandy is doing a Mellisa lee today, has her skirt up to her tits

Mon, 03/07/2011 - 16:13 | 1027224 Michael
Michael's picture

Best way to view CNBC is on mute while listening to Alex Jones. It's a hoot.

Mon, 03/07/2011 - 18:35 | 1027696 MolotovCockhead
MolotovCockhead's picture

Best way to view CNBC is on mute.

Incidently, I like to watch Ben Bernanke giving interview with the volume off. Observe how his lips can easily see that pathetic fella lying through his nose! From his body language you can tell he's so damn terrified of being exposed as a liar on TV.

Mon, 03/07/2011 - 16:09 | 1027207 asdasmos
asdasmos's picture

Realty Mogul, Sam Zell, Talks Inflation - says we're not seeing inflation because the CPI is distorted. (Mar. 3 2011)

Mon, 03/07/2011 - 16:12 | 1027214 Michael
Michael's picture

Best way to view CNBC is on mute while listening to Alex Jones. It's a hoot.

Mon, 03/07/2011 - 16:13 | 1027218 Misean
Misean's picture

Is that like watching Alice in Wonderland to Dark Side of the Moon?

Mon, 03/07/2011 - 16:16 | 1027230 Michael
Michael's picture

It's a balanced approach.

Mon, 03/07/2011 - 20:55 | 1028130 metastar
metastar's picture

While somewhat over the top, I've found far more truth on the Alex Jones show than anywhere else on the MSM. This is the reason I also read ZH.

Mon, 03/07/2011 - 16:17 | 1027234 buzzsaw99
buzzsaw99's picture

For every put buyer there is a seller.

Mon, 03/07/2011 - 16:44 | 1027303 nonclaim
nonclaim's picture

The seller may be (very likely) a market maker and they have a bag of tricks to hedge open positions.

Mon, 03/07/2011 - 17:31 | 1027456 New_Meat
New_Meat's picture

and munch the spread

Mon, 03/07/2011 - 18:01 | 1027587 Minimum Clearance
Minimum Clearance's picture

Is the data on the screen above correct?  When I look at JNK $39 April puts on Fidelity and on Yahoo, there were only 250 traded today.

Mon, 03/07/2011 - 18:39 | 1027676 Coxxy
Coxxy's picture

JNK1116P39 traded 4250 contracts around 12:17.  That is correct via BBG and TR however claims 240 which is weird because TR supplies their data feed.

Mon, 03/07/2011 - 20:26 | 1027984 lsjcma
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Mon, 03/07/2011 - 23:36 | 1028276 nonclaim
nonclaim's picture

ZH is not the best place to spam one time use products unless it's a .223 or 5.56.

Gold rings might work though, but not diamonds.

Best of luck to you. Now go away.

Mon, 03/07/2011 - 20:45 | 1028098 XPolemic
XPolemic's picture

Sorry to be ignorant ... is JNK an index of B paper?


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