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December 13, 2011  Tue 10:03 AM CT

IYR: SEE CHART GET CHAIN FIND STRATEGIES
The iShares U.S. Real Estate Fund has been range-bound for the last couple of weeks, and one large option trade is looking for the stock to make a move.

The IYR trades at $54.94. it is down 0.94 percent but remains in the range that has been in place since shares bounced off support just above $51 at the end of November.

Topping today's option volume in the IYR is one print in the March 50 puts, where a single block of 7,500 was apparently bought for $1.90. About a minute later 150,000 IYR shares changed hands for $55.03.

The stock trade would create an overall position that is largely delta-neutral, meaning that it could profit if IYR breaks either higher or lower. (See our Education section)
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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