Nervous tone lingers in energy space
Chris McKhann | email@example.com
optionMONSTER's Depth Charge monitoring system detected the purchase of 10,000 September 68 puts for the ask price of $0.42, while 20,000 September 63 puts were sold for $0.11. Volume at both strikes was more than open interest, so it was a new opening position.
Known as a ratio spread, the strategy cost $0.20 and will earn a maximum profit of 2,400 percent if XLE closes at $63 on expiration. Below that, he or she faces assignment and the obligation to buy shares. They are probably using the puts to hedge a long position in the fund, and would be willing to own more in the event of a pullback. A similar trade appeared in the September contracts on Friday.
XLE rose 0.63 percent to $72.43 in early afternoon trading. The portfolio offers broad exposure to energy companies including Exxon Mobil, Chevron and Schlumberger.
More than 37,000 option contracts have traded so far today, compared with the regular daily average of less than 24,000. Puts outnumber calls by 14 to 1.