Hyg Puns

Pls Feel free to offer!

TL;DR (including relevant points to GME!):

• UBS Group AG is short GME (alongside Citadel, Virtu, Susquehanna, G1, Jane Street). As evidenced by other DD writers, many--if not all those parties--have puts (bets against) HYG, which tracks corporate junk bonds. Those banks/SHFs may expect HYG/corporate junk bonds to tank (making them money via their put options) once the market crashes, and could be using HYG puts in part to hedge against GME mooning/market crashing (see u/Get-It-Got 's DD on HYG: https://www.reddit.com/r/Superstonk/comments/ns7k6q/could_gamestops_liftoff_unravel_corporate_junk/).
• For GME short UBS Group AG, they actually have more puts (bets against) in terms of total dollars invested on EEM puts than HYG puts. EEM is an ETF that tracks emerging markets, mainly based in China. These puts could be representative of bigger bets and that they will make more money betting on how hard China crashes via EEM puts than corporate junk bonds failing via HYG puts.
• Lots of other banks seem to have EEM shares, calls (bets for), and puts (bets against) including Bank of America, Morgan Stanley, Wells Fargo, Goldman Sachs.
• The Retirement Systems of Alabama, which is the owner of the 55 Water Street building in NYC, the building which houses the DTCC as part of the US stock market, which is meant to essentially contain the shares of all stocks such as GME also seems to have exposure to EEM. Per my previous DD, Retirement Systems of Alabama has had a history of not being transparent of how they invest their money, or how they figure out where to invest it (tin foil: RSA somehow got wind of this EEM move, and has joined UBS, and other GME short banks in their EEM exposure).

For the past few months, I have been looking at UBS/UBS Group AG's relevance to the GME saga. Although UBS is not as well-known as a GME short alongside more common names like Citadel, Virtu, and Susquehanna, UBS is a GME short that also runs the largest dark pool in the country and has the lion's share of GME's dark pool volume run through its dark pool (UBS-ATS). UBS also has an extensive history of naked shorting, much of which I had detailed in my discussion of their rogue trader Kweku Adoboli.

I was recently digging into UBS Group AG's (GME shorter) on their Fintel page. I pulled up the ranking of their recent holding

Hello all, I'm making my port a little more correction-friendly going into this new year and I'd like to share a play I've been accumulating.

HYG is a major high yield junk grade bond ETF which bundles a basket of junk bonds together and distributes their yields on a monthly basis. Pretty standard stuff.

The stock price tracks the yield of the underlying bonds which gives it similar risk profile to the bonds themselves. Mainly the risks are that it can have mild typical fluctuations with a chance to crash down, but not crash up or be squeezed through options or sudden discovery/attention like an individual equity. The monthly distributions are priced into the options chain.

HYG is non-accretive, meaning the returns are directly distributed and do not compound. The returns compound if they are DRIP'd but the stock doesn't have that built in. We will use these two characteristics to build a play.

Junk bonds tend to follow the equity market in corrections and rallies, but the interest rates also have a soft cap due to the nature of the risk tier they inhabit. We are currently on the lower side of that yield due to strong demand and lower perceived risk of the bonds.

While over the past 20 years we have seen HYG enter the $90's during different rate regimes, over the past three years we haven't seen it break past $88.50.

I believe now is a good time to start collecting call premium. I'm selling monthly $87/$92c's with a JUL $90c tail just in case things get out of hand.

A desirable scenario would be HYG staying flat and rolling monthly for a $0.40 credit on a $5-wide spread. A more likely scenario will be HYG drifting back up to about $87.50, which would negate the first month and reset the play to an $87.50/$92.00c, then carrying on with that one during the rolls.

An undesirable scenario would be HYG pushing to $88.50, however as this is a contrary position this would be welcomed as the rest of the port would be doing very well. Finally in a worst case scenario the $90c tail would catch a runaway rally and protect the other half of the spread as it gets rolled up to an $88.50/$92.00 and becomes a scratch for the remainder of the 7-month duration.

The concept of this play is to have some income that would be immune to a market correction. While I don't believe a correction is absolutely going to happen, there is definitely an increased chance there could be one, so taking some dir

So, a couple weeks ago I made this post about the abnormally large number of expiring HYG puts on 8/20, and how I predicted that would cause a collateral shortage and rile the markets today on 8/23. Clearly that has not happened and I was wrong.

While I do remain fully convinced about my theory of a coming massive market crash in the next month or two, and that crash triggering the MOASS, I was very wrong on my assumptions about the junk bond market. Feel free to discount any other ideas or theories I have accordingly.

Best of luck to all of you on all your trades, and let this be a reminder to us all to always take things with a grain of salt and do your own research, because random people on the internet are often wrong.

EDIT: to clarify some of my reasoning, I had multiple triggers hitting on 8/20, including the T+35 date from the expired GME 7/16 puts. But to those in the comments asking, yes, 9/17 is looking very much like another high stress date that may result in a big spike in volatility and collateral calls on Monday, 9/20. Additionally many more restrictions will be in place post Sept. 1 rule changes. I hesitate to put forth more predictions though, until I have figured out exactly where I went wrong before.

My goal is to inform and educate myself and others, simply saying "well, it didn't work this time and I don't know why, but next time it definitely will!" is not something I'm comfortable doing. Before I make any other predictions, I need to know why this one was incorrect.

EDIT2: to whoever gave me the "Defeated" award? Bravo and Chef's Kiss, mwah!

Just got banned by Duble U Ess Bee for a post about a coming market crash that had well north of 1k upvotes in just a few hours

EDIT: managed to find the text! Here it is, hate it or not, it lives again!

So as I've noted in some of my earlier posts on the wave of warning signs in the market, there's some weird stuff going on with the options chain for the HYG ETF. HYG is an ETF of Junk Bonds - bonds rated BB or lower. But until I really dug into it I didn't realize just how weird this activity is.

Between 7/23/2021 and 1/21/2022, there are 3,790,802 puts in open interest on HYG. To really put how big this number is in perspective, this is more than the total volume of Puts AND Calls open interest on SPY - the single most option traded ETF in the market.

What makes this even more odd is that HYG doesn't really move. It's so stable it makes AT&T look volatile. During the COVID crash it dropped all the way from $88.40 to a low of $69.90. Today it closed at... $87.78.

In addition to the current 3.8 million put options open on HYG, another 2 million just expired in the last few weeks. Again, there is NOTHING like this anywhere else on the market on anything. Inverse ETF's, both leveraged and unleveraged have at most a couple hundred thousand options open over the next couple of months. So, again, what is are these MILLIONS of put options, which cost BILLIONS of dollars to open, doing on an index that doesn't move?

Now, you could argue these are puts against the end of the Fed's Junk Bond buying program, except that's largely ended now, and yet more put options are still being opened. So here's what I think is happening, and I've narrowed it down to two options.

1. Fuckery is afoot, and this is tied to some kind of bullshit undisclosed swaps in an epic pile of risked out dipshittery that's impressive even for Wall Street.
2. It's a hedge against an expected market crash caused by inflation and rates going up way way sooner than anyone expects.

If it's number 1, well, we won't know about the details until someone gets a little to close to the edge on a coke binge and decides to do a tell-all come to Jesus and repent their sins bit. So lets talk about number 2, 'cause that's way more interesting.

HYG is made up of junk debt. It pays a high yield because it's shit, and it's likely to go bust. So anyone chasing bond yields, this is the place to go. And for awhile now, it's been way, way safer than it actually should be because rates are so low that

If/when the Fed announced an increase in rate. Which do you expect to fall more (in % terms) treasury bonds or high yield (junk) bonds? (assuming same maturity)

View Poll

In running a merry little Saturday learn-some-more rabbit hole, ran across a post about the HYG June 18 PUT OI being very large and recently growing.

HYG outstanding shares is 53M.

Eyeballing the entire option chain on yahoo it looks like 2M put contracts (but only 200k ITM now). [MarketChameleon seems to hint at possibly 5M on the mostly blurred teaser screen?]

Is this scale of put OI normal, e.g., normal MM hedging?

Trying to think for myself, I do note a few extreme events:

$15 drop for Feb 21 2020 ($83) - Mar 23 2020 ($68) COVID

$11 drop for Sep 12 2008 ($92) - Sep 17 2008 ($81) related to 2008 financial meltdown stuff? [worst week I notice at a quick glance]

Thanks for any insight. Or call me dumb, and I'll drink my own tears.

There were a few posts mentioning a large amount of Puts on HYG expiring yesterday - does anyone know whether they finished in the money? if so, by how much?

(Apologies, I don't know how to look this up myself !)