Smart Money Flow Type: Where is the money going? Wall Street is unprecedentedly shorting this ETF with an 18% software loan exposure. Will the risks from traditional credit trigger a $BTC explosion?

Market pessimism toward the software industry is quickly spreading from the stock market to the credit sector. Traders are making record-breaking options bets, heavily shorting an ETF that holds a large amount of software company loans.

This product, the Invesco Preferred Loan ETF (ticker BKLN), tracks a leveraged loan index. Its core risk lies in its holdings structure. According to Haina International Group, about 18% of the fund’s assets are loans to software companies, including well-known software firms like McAfee and Proofpoint.

Over the past three weeks, bearish bets against BKLN have surged. Data shows its put options have exceeded 400,000 contracts, equivalent to 40 million shares of the underlying. This volume has pushed the open interest in puts to the highest level since 2023.

Trading details from Monday further reinforced the market’s bearish consensus. An investor bought 30,000 put options expiring in April with a strike price of $20. Calculations show that as long as the fund’s price drops by 3.5%—breaking below the lowest point since April 2025—this trade would break even.

More aggressive bets then emerged: another 50,000 puts traded, betting that the ETF would decline by a similar magnitude before mid-July.

In addition to heavy shorting in the options market, cash flows in the spot market are also grim. As of Monday, BKLN’s price fell about 1%, closing at $20.44, hitting a new low since April 10, 2025. The ETF has experienced four consecutive weeks of net outflows, totaling nearly $1 billion.

Monday’s trading likely pushed overall short positions even higher. In fact, a series of trades last week showed investors frantically building hedges by buying puts to protect against declines. Data indicates that last week, investors bought a total of 250,000 July-expiring $20 puts, and as early as February, they had purchased 100,000 April-expiring puts at the same strike.

Market sentiment’s collapse is not only reflected in credit shorting but also in the complete abandonment of hopes for a rebound in software stocks. Traders sold call options on the iShares Expanded Tech Software Sector ETF (IGV) with a strike of $92 expiring in March. This move closed out positions established during the software selloff about two weeks ago, signaling that investors no longer believe in a short-term rebound for the sector.

Regarding this liquidation, Haina International Group offered a blunt assessment in their Friday analysis: as the sector continues to underperform, investors are “throwing in the towel.”

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