Put volume in Treasury ETF reaches year high as traders unwind “blue wave” trades

According to data source Trade Alert, volume in put options on the iShares 20+ Year Treasury Bond ETF, the exchange-traded fund (ETF) that tracks longer-dated Treasury bonds, reached its highest since June 2019 on Wednesday, as traders squared off reflation trades initiated in the run-up to the US elections on hopes of Democratic "blue wave" sweep of the U.S. presidency and both houses of Congress and a massive fiscal stimulus package under Biden's leadership. 

"Most of the flow we are seeing today is investors closing put spreads they likely had on for a blue wave," Chris Murphy, the co-head of derivatives strategy at Susquehanna International Group, told Reuters. 

While the divided Congress is still likely to pass the stimulus bill, the size of the spending package will likely be smaller than what would have come through had there been a broad Democratic victory.