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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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Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

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