dbuch

Sorry meant to say 11 cents for LQD 120 puts expiring in December 2020 so 1 month (not December 2021). So the cost to hedge would be 70 bps/month and only protected below 120 so this would be a tail bet in case of another March/April type period. That is very expensive compared to what Ackman can do.

I think the only way an average investor could replicate this hedge is HYG or LQD ETF put options. You could buy an OTM put on LQD Dec 2021 at $120 for .11 cents. LQD fell to $105 in March so the return would be $15/.11 or 136x your investment. Seems expensive compared to Bill buying IG CDX for 50 bps a year. It would cost 70 bps/month for us (1/136).