Options Trading News

October 2, 2012  Tue 11:01 AM CT

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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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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