Options Trading News

October 12, 2012  Fri 9:57 AM CT

As the SPDR Retail Fund continues to pull back from last month's highs, a huge three-way trade tops today's option activity in the ETF.

The XRT is down fractionally this morning at $62.51. The exchange-traded fund hit an all-time high of $65.47 a month ago but has been holding support at $62 since then.

More than 64,000 XRT options have traded so far, compared to a daily average of 26,000 in the last month. optionMONSTER's systems show that a trader sold 20,000 October 63 puts for the bid price of $0.75 against open interest of more than 25,000. At the same time, he or she bought 20,000 November 62 puts for $1.20 and sold 20,000 November 58 puts for $0.35.

While the latter was done against greater open interest, it appears that the trader is closing a long put position and opening a new put spread in November. The trader spends a net $0.10 to get downside exposure in the XRT to $58. This could be an outright bearish play or a protective hedge on a long stock position. (See our Education section)
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »