Investors are using options to adjust huge bullish positions in
large sectors at low cost.
optionMONSTER's Heat Seeker tracking program detected heavy call
volume in the SPDR Technology (XLK) and the SPDR Financial (XLF)
exchange-traded funds. The trades were very similar and occurred
less than 10 minutes apart, so they may have been the work of a
single large institutional player.
First, the traders sold 20,000 June 32 calls on the XLK for $0.51
and bought a matching number of July 33 calls for $0.27. The next
transaction involved the sale of 60,650 XLF July 20 calls for $0.55
and the purchase of 60,650 August 21 calls for $0.27.
In both cases, volume was below open interest in the nearer-dated
contracts that were sold. This suggests that existing long
positions were closed and rolled forward in time. The XLK trade
generated a credit of $0.24, and the XLF roll yielded $0.28.
Adjusting their positions let the investors take some money off the
table while adding a month of
. They also reduced the amount of money they could lose in the
event of a short-term pullback because the new contracts have lower
and are less susceptible to
. (See our
The XLK fell 1.09 percent to $31.75, and XLF declined 1.05 percent
The transactions were the largest in both funds. Total option
volume was triple the daily average in both, as well.
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.