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March 22, 2013  Fri 3:16 AM CT

XLU: SEE CHART GET CHAIN FIND STRATEGIES
A large trade is looking for a big move in the Utilities Select Sector SPDR Fund.

About 15,500 XLU options traded yesterday, nearly twice its daily average in the last month. optionMONSTER systems show that most of the volume was in just one print.

A trader bought 10,000 June 37 puts for the ask price of $0.51. This is clearly a new position, as the volume was twice the open interest in the strike before the trade appeared.

Less than a minute later, a block of 340,000 shares was purchased for $38.14. Given that the delta of the option position is -340,000, the overall trade is almost certainly a directionally neutral play that is looking for higher volatility from a sharp break up or down in the exchange-traded fund. (See our Education section)

The XLU fell 0.5 percent to $38.11 yesterday, a session after its highest close since September 2008. Shares have been running higher since bouncing off support at $34 in November.

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Options Academy: At the Break

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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