Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.<\/p>\n
Spencer Platt | Getty Images<\/p>\n
While many traders focused on government bonds in the wake of new Federal Reserve<\/a> Chairman Kevin Warsh’s first meeting, it was another corner of the debt markets that caught the eye of options traders.<\/p>\n The iShares iBoxx High Yield Corporate Bond ETF (HYG)<\/a> saw elevated put volume on Thursday.<\/p>\n One eyebrow-raising trade saw an investor pay $1.3 million to buy 20,000 of the Jan. 27 75-strike puts. Put volume was five times that of calls, and of the 226,000 HYG options that have traded Thursday, 190,000 of them were puts, according to ThinkorSwim data.<\/p>\n It’s unclear the exact catalyst for the bearish action, but some market participants pointed to the Fed regime change as one reason.<\/p>\n “For the previous 20 years, bond traders had been given a script to follow,” said Zed Francis, chief investment officer and co-founder at Chicago-based Convexitas. “They were just told they’re going to have to do their homework again. That might cause a buyer’s strike for a bit.”<\/p>\n Another reason could be the continued sell-off in crude oil prices after the U.S. and Iran agreed to a peace deal. Crude prices touched their lowest levels since March on Thursday. According to iShares, more than 11%<\/a> of the HYG ETF is invested in the energy sector.<\/p>\n The most popular strike by volume in HYG is the 77-strike put expiring Aug. 21, where 40,000 contracts traded hands Thursday. At 39 cents per contract, or $39 a trade, buyers need HYG to drop another 4% to break even.<\/p>\n