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October 12, 2012  Fri 9:57 AM CT

XRT: SEE CHART GET CHAIN FIND STRATEGIES
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)
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Options Academy: At the Break

So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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