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April 16, 2013  Tue 10:58 AM CT

XOP: SEE CHART GET CHAIN FIND STRATEGIES
The SPDR Oil & Gas Exploration & Production Fund is bouncing a day after posting its lowest close in more than three months, but one trader is positioning for another leg lower.

optionMONSTER systems show that more than 4,000 each of the April 56 and May 54 puts traded in unison. The big prints of 3,182 moved together, with the 56 puts sold for the bid price of $0.98 in volume below previous open interest of 14,870. The 54 puts were bought for the ask price of $1.28 against open interest of just 216 contracts, clearly indicating a new position.

Given the data and the market action, this appears to be a trader rolling a long-put position one month later and to a lower strike that is out of the money. This also could very well be part of a hedging strategy. (See our Education section)

The XOP is up 1.5 percent to $56 even in midday trading after posting its lowest close since Jan. 9 yesterday. The exchange-traded fund was above $62 at the highs of a month ago.
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Options Academy: At the Break

So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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