Options Trading News

June 19, 2013  Wed 3:16 AM CT

One large trader sees limited upside in the KBW Bank Index.

optionMONSTER systems show that all of the BKX option volume yesterday was in a single print. A trader sold 8,000 August 62.50 calls for $1.05, below the listed bid price at the time. This volume compared to the total daily average of just 276 contracts, representing a new position as there was no previous open interest in that strike.

The call selling is a bet that the index won't be above 62.50 by expiration in mid-August. There is no single underlying stock for BKX, so this is clearly not a traditional covered call position, but the options could have been sold against a basket of names in the index to create a similar strategy. (See our Education section)

The BKX was up 0.81 percent yesterday to close at 61.11. The index hit 62.92 at the end of May, its highest reading since November 2008. It has been climbing for the last year from levels below 44.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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