Giant downside trade against the banks
David Russell | firstname.lastname@example.org
optionMONSTER's Depth Charge tracking system detected the purchase of 44,453 June 23 puts on the SPDR S&P 500 Bank exchange-trade fund for $0.83. An equal number of June 23 calls were sold at the same time for $0.68. Volume was more than 90 times open interest in each strike, and the transaction was the largest in the option market so far today.
The trade cost $0.15 and is tantamount to shorting KBE at $22.85. The investor may own the fund and wants to hedge against a pullback in the next two months. This way the gains from the options will cover any losses, but the position will also require the trader to sell the stock if it jumps. (See our Education section)
KBE is down 1.21 percent to $22.93 in morning trading. It rallied 20 percent in the first three months of the year but has been struggling since then. The fund is now pushing below its 50-day moving average and is hitting resistance at its 30-day average, which could be leading some chart watchers to believe that it's at risk of a drop.
Overall option volume in the security is more than 500 times greater than average so far today. KBE tracks a broad array of banking names, including Bank of America, Regions Financial, and JP Morgan.