I'm still mulling it over, but I'll let you know if I take the plunge and manage to borrow some to short.
Risks I see include: high yield doing well, cyclicals doing well, one or more of their big positions seeing ratings upgrades, spreads dropping, the aforementioned rights offering, the short being called inopportunely. Enough possible that I'd be very leery of a naked short.
I'd be happy if I could buy yield puts on a similar-duration high-yield index, with which I could hedge away some risk. As I said, I'm considering being long PMH against it, whose portfolio should do well if BHY's does, though the mismatch with tax-free health care vs. cyclicals does worry me.
There actually are a lot of high yield CEFs that trade at a premium, but usually I have a hard time borrowing them.
-mb |
