Pair Trade Idea Of The Day: Short PHK (Good Luck Finding Borrow), Long JNK
If you have always been waiting for a relatively risk-free pair trade, which also has the added bonus of allowing you to put your money against Bill Gross, today's pair trade idea of the day, courtesy of Damien Cleusix is just for you, although as A.B. points out, good luck finding borrow: hopefully by now you have some incriminating pictures of your repo desk guy, which will force him to release a couple thousand shares your way.Of course, if Mr. Gross is long a sufficient amount of domestic insurance company debt (i.e. Fidelity which has no borrow whatsoever), doesn't matter how much clout you may have - it is 'the Gross' way or the Pacific Coast Highway.
We are back above 50% premium to NAV on PHK (PIMCO HIGH INCOME FUND).
We are recommending to short it and buy HYG and/or JNK to hedge (we would only hedge half of the short as we are negative on high yield bonds here).
There is >25% just waiting to be harvested here. The main difficulty will be to locate sufficient share to short.
Our last close-end fund arbitrage recommendation (PHYS vs GLD) made 15% in a matter of day. We are not expecting this now and it might take up to October for the trade to bear fruits.
And here is A.B.'s not too PC contribution on the actual implementation of this trade:
can't short any of these HY ETFs, according to Fidelity..... what a fucking joke. Looks like Gross is VERY LONG the domestic insurance company debt (i.e. AIG). Not too much political clout there, is there?