Options Trading News

November 8, 2013  Fri 3:16 AM CT

Large trades in the S&P 500 Index options are betting on lower volatility.

optionMONSTER systems show that 790,000 SPX options traded yesterday, about 50 percent above its daily average for the last month. The big print of 11,928 was in the January 1690 puts, which was sold for $18.50. That is a bet that the SPX will remain above 1690 through the beginning of next year.

A bit later the second-largest trade lit up our scanners, a block of 3,000 December 2015 850 puts that was sold for $10.50. This is a longer-term bet that any downside in the SPX won't be extreme.

The volume was well above open interest at each strike, indicating that these are new positions. And because the S&P 500 Index options settle in cash, the put sellers don't face the possibility of having to buy shares if the SPX is below the strike prices at their respective expiration dates. (See our Education section)

The SPX was down 23.34 points yesterday, or 1.32 percent, to close at 1747.15. It was below 1690 a month ago but hasn't been under 850 since the lows of early 2009.
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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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