Options Trading News

November 13, 2012  Tue 2:45 AM CT

The SPDR Homebuilders Fund has been falling since reaching five-year highs two weeks ago, and a large trade is looking for continued losses.

More than 42,000 each of January 24 and 22 puts traded yesterday, according to optionMONSTER's systems. A block of 21,000 of the 24 puts were bought for the ask price of $0.70 while 21,000 of the 22 puts were sold for the bid of $0.28. Forty minutes later, blocks of 18,343 went for $0.72 and $0.28 respectively.

This put spread cost the trader roughly $0.43, which is at risk if the XHB is above $24 at expiration. The maximum profit would come if the fund is below $22 at expiration. Shares last closed below that level on Aug. 6. (See our Education section)

The XHB fell 1.48 percent to $25.29 yesterday. The exchange-traded fund hit a high of $27.06 on Nov. 2 but has been declining ever since then.

The total option volume in the XHB was 130,000 contracts, about 10 times its daily average in the last month. Fewer than 10,000 of contracts were calls.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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