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June 16, 2014  Mon 9:40 AM CT

OIH: SEE CHART GET CHAIN FIND STRATEGIES
Crude-oil prices have spiked higher with the conflict in Iraq, but one large trader is preparing for a potential drop in the Market Vectors Oil Services Fund.

A trader purchased blocks of 3,424 and 857 July 53 puts for $0.50 and $0.45 respectively, according to optionMONSTER's Depth Charge tracking system. These are clearly new positions, as previous open interest in the strike was just 17r contracts.

The put buying could be an outright bearish trade or a hedge on a long position in the exchange-traded fund or its component companies. (See our Education section)

The OIH is down 0.53 percent to $54.92 this morning. It has been trending higher from support at $55 at the start of February and hit a record high of $55.22 on Friday.
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Volatility and the Option Pricing Model

OptionsĀ are derivatives of underlying assets and can be boiled down to a mathematical formula. As such, the value of an option is determined by a formula calledĀ the Options Pricing Model.

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