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February 19, 2013  Tue 1:47 AM CT

XLB: SEE CHART GET CHAIN FIND STRATEGIES
A large call seller is expecting the SPDR Materials Fund to stay trapped in a range.

optionMONSTER systems detected the sale of 24,810 March 40 calls for the bid price of $0.25 on Friday. The volume was almost 3 times higher than the strike's open interest before the session began, clearly showing that this is a new position.

These options were likely sold against long shares in a covered call position, a neutral strategy that is looking for the fund to continue trading sideways in coming weeks. (See our Education section)

The XLB finished Friday down fractionally at $39.35. It has been trading mostly between $39 and $39.70 for more than a month, posting a 52-week intraday high just shy of $40 at the end of January. The 20-day historical volatility for the exchange-traded fund has fallen to a new 52-week low of 10 percent.

More than 37,000 XLB options traded on the day, compared to a daily average of 10,000. 
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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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