What's behind puts in real-estate ETF
Chris McKhann | [email protected]
A trader bought 4,000 June 75 puts for $2.25 and sold 15,000 May 72 puts for the bid price of $0.32, according to optionMONSTER systems. Another 5,000 of those 72 puts traded a few minutes later, also for $0.32.
This is a complex trade known as a diagonal ratio spread, which is betting that the IYR will stay above $72 by the May expiration but will trade lower beyond that. The sale of the greater number of the nearer-dated puts helps offset the cost of the higher-strike contracts. (See our Education section)
The IYR is down 0.37 percent to $73.19. Yesterday's close and today's intraday high of $73.50 are the highest levels for the exchange-traded fund since 2007.
More than 110,000 IYR options already changed hands this morning, compared to a daily average of 20,000.