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August 22, 2013  Thu 4:14 AM CT

ITB: SEE CHART GET CHAIN FIND STRATEGIES
The iShares U.S. Home Construction Fund is facing a large bearish position.

optionMONSTER systems show that 10,000 each of the October 17 and 21 puts traded yesterday. The 21 puts were bought for $0.98 and the 17 puts were sold for $0.08. Both traded well above previous open interest at their respective strikes, clearly indicating new activity.

This vertical spread cost the trader $0.90, which is the maximum risk if ITB remains above $21. The maximum potential gain is $3.10 if the stock is below $17 at that time. (See our Education section)

The ITB was down fractionally at the end of the day to $21.24. The exchange-traded fund has been trending downward from above $26 in May and reached their lowest levels of 2013 last week.
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Education & Strategy

The sweet spot

When using the Stock Replacement Strategy, we must remember that in reality, we are doing a STOCK trade. We are just using options. We are replacing the stock position with an option position (long calls).

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