bond questions

I don't know if Amazon will make their coupon five years out.


But I'm thinking I could write stock puts, and get a correlated payout.


I'm thinking there might be some other junk out there that would add a more of a new dimension to my stock portfolio.


And, I'm thinking that, rather than this correlation being priced in to the relative debt yields, the opposite might be true.


eLROY

High yield spreads tend to be correlated with equities making it possible to do some relative value trades. This is one area that i think will grow among hedge funds and other fixed income players. With the models like KMV, which is essentially an option model of bonds and equities, gaining in popularity(since they have outperformed S&P and Moody's), trading corporates versus stocks will be come a more common trade.


Currently, there is still poor liquidity in corporates and the credit derivatives sector is still in its infancy but there is a tremendous push for more credit related products and should result in a much more efficient market going forward.