Traders are increasingly hedging against credit risk in the software sector: Investors bought ~400,000 put options, equivalent to 40 million shares, on the Invesco Senior Loan ETF, BKLN, over the last 3 weeks. This fund tracks the 100 largest institutional leveraged loans, made primarily to below-investment-grade corporations, and has ~18% exposure to the software sector and a market value of ~$6.8 billion. As a result, open interest in BKLN puts rose to the highest since 2023. On Monday alone, an investor bought 30,000 April $20 put contracts in BKLN. BKLN has also seen 4 consecutive weekly outflows, totaling ~$1 billion. Is the short software trade too crowded?(The Kobeissi Letter)