Options Trading News

November 21, 2012  Wed 3:47 AM CT

The SPDR S&P Oil & Gas Exploration & Production Fund drew an enormous downside trade yesterday.

A trader bought 20,360 March 45 puts for $1.16, according to optionMONSTER's Depth Charge system. The previous open interest was a mere 78 contracts, so this is a new position.

The long puts were not tied to any trading in the underlying shares identified by our systems yesterday. It could be an outright bearish play or a hedge on a long position in the exchange-traded fund or its underlying stocks. (See our Education section)

The trader is positioning for a potential drop below the $45 strike price by expiration in mid-March. The XOP was last below that price in October, when it briefly dipped below $40.  

The fund fell 0.34 percent to $52.65 yesterday after bouncing off support at $50 on Friday and seeing big gains on Monday. Shares have been trending lower since trading just shy of $60 in mid-September.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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