Long-term spread is bullish on utilities
Chris McKhann | [email protected]
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.