Options Trading News

January 25, 2013  Fri 2:45 AM CT

A huge put spread dominated yesterday's option activity in the SPDR Retail Fund as it hit a new all-time high.

More than 266,000 XRT options changed hands in the session, compared to a daily average of fewer than 18,000. Only 16,000 of those contracts were calls.

optionMONSTER's Depth Charge system shows that a trader bought 99,999 March 64 puts for the ask price of $0.72 and sold the same number of the March 60 puts for the bid price of $0.22. The volume was more than twice the previous open interest at each strike, clearly indicating new activity.

This vertical spread cost $0.50 to open, which is the amount at risk if the XRT remains above $64 through the March expiration. The maximum gain of $3.50 would be realized if the exchange-traded fund is below the lower $60 strike price at that time. (See our Education section)

The XRT finished the day up 0.85 percent at $66.19 after peaking at $66.94 earlier in the session. These are new lifetime highs for the fund, which tested support at $60 at the end of 2012.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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