Transports have been going places, but one investor wants some
optionMONSTER's Depth Charge monitoring system detected the
purchase of 2,000 June 113 puts in the iShares Dow Jones
Transportation Average Fund for $2.15. An equal number of June 108
puts was sold at the same time for $0.82. Volume was more than 5
times the previous open interest at each strike, indicating that
new money was put to work.
Known as a
bearish put spread
, the transaction cost $1.33 and will earn a maximum profit of 276
percent if the fund closes at or below $108 on expiration. (See our
section for more on how to generate leverage using options.)
The investor probably owns the IYT or some of its key companies,
which include railroads Union Pacific and Kansas City Southern,
plus shipping names such as FedEx and United Parcel Service. Buying
the put spread will protect the trader from a pullback without
forcing him or her to exit the position.
The IYT rose 1.6 percent to $114.29 yesterday and has been leading
the broader market higher for months. It's up 21 percent since the
beginning of the year, outpacing the S&P 500's 14 percent gain.
The fund has also broken back into record territory this week
following a pullback in March and April.
Total option volume was quadruple the daily average in the IYT
yesterday, with puts outnumbering calls by 7 to 1.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.