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Traders Dive Into Junk-Bond ETF Hedges on Oil Concerns: Options
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Plunging oil prices have left options traders bracing for more losses in high-yield debt.
Options hedging against swings on an exchange-traded fund tracking the bonds cost the most since 2010 versus those on an ETF following Treasuries and were at an almost six-year high relative to contracts on a Standard & Poor’s 500 Index fund. Investors are weary of the debt after crude oil sank almost 50 percent since June given the high proportion of high-yield bonds from energy companies.