Call seller sees limited gains in energy
Chris McKhann | firstname.lastname@example.org
The XLE is up 1.51 percent this morning to $69.29. The exchange-traded fund was trading above $76 in late February and has been trending lower since then, closing below its 10-day moving average in the last three weeks.
A trader sold 10,000 April 71 calls for the bid price of $0.18 in a single print, according to optionMONSTER's systems. The volume was more than 3 times the previous open interest, so this is a new position.
The call seller apparently believes that the XLE won't trade much above the $71 strike price in the next week. The calls may have been sold naked, which may carry unlimited risk in theory but is usually much less risky in reality than short puts, especially in an ETF.
It is also possible that the options were sold against long stock in a covered call strategy, which would be bullish up to the strike but still does not anticipate much upside beyond that. (See our Education section)