Huge bullish trades in sector funds
David Russell | [email protected]
optionMONSTER's Heat Seeker tracking program detected heavy call volume in the SPDR Technology (XLK) and the SPDR Financial (XLF) exchange-traded funds. The trades were very similar and occurred less than 10 minutes apart, so they may have been the work of a single large institutional player.
First, the traders sold 20,000 June 32 calls on the XLK for $0.51 and bought a matching number of July 33 calls for $0.27. The next transaction involved the sale of 60,650 XLF July 20 calls for $0.55 and the purchase of 60,650 August 21 calls for $0.27.
In both cases, volume was below open interest in the nearer-dated contracts that were sold. This suggests that existing long positions were closed and rolled forward in time. The XLK trade generated a credit of $0.24, and the XLF roll yielded $0.28.
Adjusting their positions let the investors take some money off the table while adding a month of long exposure. They also reduced the amount of money they could lose in the event of a short-term pullback because the new contracts have lower deltas and are less susceptible to time decay. (See our Education section)
The XLK fell 1.09 percent to $31.75, and XLF declined 1.05 percent to $19.83.
The transactions were the largest in both funds. Total option volume was triple the daily average in both, as well.