Industrials have been catching a bid, and one large trader is looking for a big rally.
optionMONSTER's Heat Seeker monitoring system detected the purchase of 23,000 January 31 calls on the Industrial Select Sector SPDR Fund for $2.66. An equal number of January 31 puts were sold at the same time for $2.42. Volume was 5 times open interest in both strikes.
The position cost 0.24 to open and will simulate owning shares in the fund, whose largest holdings include General Electric, United Technologies, and United Parcel Service. The investor now stands to enjoy massive leverage to the upside or downside, essentially controlling 2.3 million shares for less than 1 percent of the cost.
The XLI is up 1.5 percent to $31.81 in midday trading. It has has started to outperform the broader market recently as investors focus on strength in the corporate and capital-goods economy despite persistent unemployment and weakness in the public sector.
Today's bullish trade followed activity earlier in the session that showed investors are feeling more confident about the broader market. (See related story )
Overall option volume in XLI is almost twice the average amount so far today.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.