Giant protective trade in financials

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One investor is using options to protect a massive position in financials.

optionMONSTER's Depth Charge market scanner detected a large three-way trade in the Financial Select Sector exchange-traded fund. Blocks of 95,596 contracts each traded in the June 18 puts (sold for $0.03), the August 19 puts (bought for $0.35), and the August 17 puts (sold for $0.09). It was the largest transaction to cross so far today.

It appears the investor previously owned the Junes as protection on the XLF or the members of the underlying index. He or she then closed that position and opened a new downside spread in the August 19 and August 17 contracts. It cost a net $0.23 and will expand to $2 if the fund closes at or below $17 on expiration. (See our Education section)

XLF is up 0.18 percent to $19.99 this morning and 22 percent so far this year. It's been the second-best performing sector fund within the S&P 500, trailing only health care, fueled by improving credit and real-estate markets.

The fund holds major financials such as Berkshire Hathaway, JP Morgan, and Wells Fargo. Total option volume is almost triple the daily average so far today, with puts outnumbering calls by 21 to 1.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: XLF

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