Options Trading News

January 10, 2013  Thu 4:14 AM CT

A long-term trade is looking for the SPDR Utilities Fund to move higher in the next two years.

optionMONSTER systems show that more than 54,000 XLU options traded on the day, compared to daily average of just 13,600 in the last month. Dominating the action was a January 2015 call spread.

A trader bought 24,611 of the 38 calls for the ask price of $0.80 and, seconds later, sold the same number of the 40 calls for $0.36. The volume was well above the previous open interest at each strike, indicating new activity.

This vertical spread cost the trader $0.44, which is the amount at risk if the XLU remains below $38 at expiration in two years. The maximum gain of $1.56 would be made if shares are above $40 at that time. (See our Education section)

The XLU finished the day at $35.21, down fractionally on the day and in the middle of its recent range. The exchange-traded fund set a 52-week high of 38.54 early August.
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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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