Huge upside trade in tech sector
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected the purchase of some 37,000 June 39 calls in the SPDR Technology exchange-traded fund for $0.14 and $0.15. Volume dwarfed premium open interest of 256 contracts, which indicates that new positions were initiated.
These long calls lock in the price where a stock can be purchased. That way, investors won't miss a rally but also risk much less capital than would be used in buying shares directly. Traders also stand to earn significant leverage from even a small gain in the stock. (See our Education section)
The XLK was up fractionally yesterday to close at $36.80 after peaking at $36.91 in the morning. It hasn't traded that high since February 2001, when the sector was in the midst of collapsing from the late-1990s tech bubble.
Yesterday's upside activity comes before the start of first-quarter earnings season. The first big announcement in the sector is Micron Technology this afternoon, followed by Yahoo and Intel in mid-April.
Total option volume in the XLK was 8 times greater than average in the session, according to the Heat Seeker. Overall calls outnumbered puts by more than 50 to 1.