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February 13, 2013  Wed 11:08 AM CT

IYR: SEE CHART GET CHAIN FIND STRATEGIES
A large call strategy tops today's option activity in the iShares U.S. Real Estate Fund.

optionMONSTER systems show that a trader sold 5,300 September 70 calls for $1.44 against open interest of more than 16,500. At the same time, he or she bought 5,300 January 70 calls for $1.97 in volume that was above the previous open interest of 1,280 at that strike, so that is a new position.

This could be a roll, with the trader closing the position in September and moving it out to January to buy more time. It could also be new calendar spread looking for the IYR to remain in a range around $70 for the coming months. (See our Education section)

The IYR is up fractionally now, trading at $68.45. The exchange-traded fund reached $68.64 this morning, its highest since June 2008.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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