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January 9, 2013  Wed 4:14 AM CT

XLF: SEE CHART GET CHAIN FIND STRATEGIES
An enormous downside trade is targeting the SPDR Financial Fund, which remains just off the two-year highs reached last week.

optionMONSTER systems show that a single put spread accounted for nearly two-thirds of the 302,270 XLF options that traded in total yesterday. A block of 95,596 April 16 puts was bought for the ask price of $0.36, and two blocks of 47,798 April 14 puts were sold for $0.09 and $0.08. The open interest at each strike was fewer than 1,000 contracts, so this is clearly a new position.

The put vertical spread cost the trader $0.265, which is the amount at risk if the XLF remains above $16 through expiration in mid-April. The maximum gain of $1.735 would be realized if the stock is below $14 at that time. (See our Education section)

The XLF finished the session at $16.96, down fractionally on the day. The exchange-traded fund closed at $17.05 on Friday, just off the highs from February 2011. It was at support at $15 in mid-November and was last below $14 at the June lows.
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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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