Even More on Morgan's Trade

http://www.ft.com/intl/cms/s/2/6197eb2a-9f64-11e1-8b84-00144feabdc0.html#axzz1vGYbQQYx

http://ftalphaville.ft.com/blog/2012/05/17/998981/

So the trade was ?
(1) buy protection on a subset of high yield companies   Possibly CDX.NA.HY.11 which expired last December
(2) sell huge amounts of protection on the general index CDX.NA.IG9 which expires December 2017 as a hedge against (1)

Since the riskier companies have a "credit" beta greater than one J.P. Morgan needed to sell more of the general index to get a market neutral hedge.  Perhaps they have learned rule 1 of stat arb.  Because two assets on average move together does not mean that they always have to move together.