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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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Education & Strategy

Gamma

As we continue to discuss the Greeks, we come to the first of the strike based Greeks called Gamma. Gamma is known as the second derivative, while delta is the first.

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