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October 2, 2012  Tue 11:01 AM CT

IYR: SEE CHART GET CHAIN FIND STRATEGIES
A put spread tops the action in the iShares U.S. Real Estate Fund as it pulls back from a four-year high.

The IYR is up 0.52 percent $64.25 after trading above $68 on Sept. 14, its highest level since the same month in 2008. Shares were below $447 at a 52-week low a year ago.

A trader sold 3,420 January 54 puts for $0.30 against open interest of 6,286, so it could have been an opening or closing transaction. At the same time, the trader bought 3,420 June 60 puts for the ask price of $3.20 against open interest of 31 contracts, so that was a new opening position.

The overall strategy could be a roll, with the trader selling the nearer-term puts to close out the position and buying the longer-term contracts at a lower strike price. It could also be a new diagonal put spread, which would also be bearish outlook but would limit the potential downside exposure, at least until that first expiration. (See our Education section)
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Using spreads to minimize risk

Last week we discussed the risk vs reward profile of a debit call spread in Wells Fargo (WFC). This week we will run thru the risk vs reward of selling a credit put spread to achieve the same exposure of that debit call spread.

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