XHB Dec Call Option Up 30 Percent In Eleven Days, RSI Alert

The $XHB DEC 16 Call was active again today with over 30,000 contracts traded. If you remember my post on July 27 I wrote that 42,000 calls traded at the DEC $16 strike. To be exact 39,864 XHB Dec 16 Calls traded at 0.575. OptionMonster mentioned that it could have been a "ratio trade".

On August 3, 30,000 contracts hit the bid at 0.75 with 85,243 open (ht crimson mind). If a hedge fund bought 30,000 contracts at 0.575 and flipped it at 0.75 eleven days later that is a 30% profit, or $525,000. This is assuming the trade was solely speculative based on the price and volume. It could have been new money or part of a spread.

$XXJLP, XHB DEC 16 Call (Courtesy of OptionsXpress)
Since that July 27 post, XHB broke above $14 and rallied 7.9% to $14.63 (from $13.56). XHB has been very strong lately. The Relative Strength Index is at 81.26. According to Stockcharts.com chart school, a level above 70 is considered overbought and is a sell signal if there is negative divergence between RSI and price. I also added on the StochRSI oscillator. The Government is making moves on the housing industry in September.

RPT-UPDATE 1-U.S. plans third redo of key housing aid effort (Reuters)

XHB Stock and RSI (Courtesy of Stockcharts.com)