OptionsHouse

Options Trading News

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)
Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »