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October 4, 2012  Thu 9:26 AM CT

XLF: SEE CHART GET CHAIN FIND STRATEGIES
The SPDR Financial Fund is pushing back toward last month's highs, and one trader is betting on a floor beneath its shares.

The XLF is up 1.5 percent to $16.07 and on pace for its highest close since Sept. 17, the day after it hit a 52-week high of $16.44. The exchange-traded fund was below $11 a year ago.

A trader sold 20,000 March 12 puts for $0.11 this morning, according to optionMONSTER's systems. The  volume was more than triple the open interest in the strike at the start of the session, clearly indicating a new position.

This put selling is a bet that the XLF will hold above $12 in the coming months. It was last below that price on a quick dip in late November. (See our Education section)
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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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