Interest rates continued to soar, crushing two macro trading instruments that had previously shown a stable trend. Options traders are betting that one of these instruments is expected to recover and rebound.
As the yield on 10-year U.S. Treasury bonds climbed to 5.3% and the yield on 30-year bonds reached 5.4%, gold fell by 4%, hitting its lowest level since the first week of August. High-yield corporate bonds continued their downward trend for five consecutive trading days, with the price of HYG ETF hitting a new low since April 2025.
Judging from the flow of options funds from Monday, traders believe that gold has the potential to rebound; however, for high-yield bonds, the market is betting that the situation may further deteriorate.
Data from the Chicago Options Exchange LiveVol shows that the trading volume of SPDR gold ETF ( GLD ) call options is approximately twice that of put options. There were over 68,000 call option purchases, while put options totaled less than 32,000. Barchart analysis indicates that the net sentiment in options trading is bullish, with a net Delta open position leaning towards the long side, and the net amount of bullish funds approaching 2.8 million US dollars.
Although the number of calls and puts traded on the GLD market is roughly equal, the largest single trade of the day was the sale of 2,000 put options with an exercise price of $375 that expired in January 2028, with a notional value of $5.9 million. This trader was likely closing out an existing short position or betting that the gold price would find support around $375. For most of this summer, the GLD price has been fluctuating within a range of about 10 points, between $370 and $380.
When investors sell put options, they are essentially betting that the price of the underlying asset will remain above the option strike price. In doing so, they assume the corresponding risks while also receiving a premium for the option.
SPDR Gold Shares ETF (GLD) Market Conditions: Closing price 377.91, down 15.50 (-3.94%); After-hours price 380.74, up 2.83 (+0.75%).
Both gold and high-yield bonds show a significant negative correlation with the yield of 10-year U.S. Treasury bonds: the 10-day correlation coefficient for GLD is -0.8, and for HYG it is as high as -0.99. However, the options trading for high-yield bonds ETF ( HYG ) exhibits a one-sided bearish sentiment.
Cboe LiveVol data shows that on Monday, the trading volume of HYG options exceeded 2.5 times the 30-day average, with the trading volume of put options being 2.5 times that of call options. 52,000 put options were bought, while only slightly over 15,000 call options were traded.
iShares iBoxx High-yield Corporate Bonds in US Dollars ETF ( HYG ) Market Price: 77.54, -0.32 (-0.41%).
SpotGamma data shows that the total premium for HYG options amounted to approximately 35 million US dollars, of which 30 million US dollars were for put options. In terms of transaction amount, 11 out of the top 12 contracts in terms of buying volume were put options; when ranked by trading volume, 8 out of the 10 most popular contracts were put options. The most sought-after option was the put option with an expiration date of November 20th and an exercise price of 78.
In a telephone interview, Nigam Arora, the founder of the “Arora Report,” stated: “Previously, the market was overly optimistic about high-yield bonds, and the risk of default was likely much higher than market expectations. Many of these debts have floating interest rates, and there will be a large number of them maturing next year. Investors were previously attracted by their coupons, but the credit spreads have not performed well, and the risk-return ratio is not worthwhile. I would not touch such assets.”
