|XLI Sep $30 Put (Yahoo Finance) Transparency...|
Interactive Brokers wrote about the put activity on Seeking Alpha. They said:
- "38,000 put options were purchased at the Sept. $30 strike for a premium of $0.26 each ten seconds prior to the sizable put play in the XLB";
- "Growing interest in the Sept. $30 put suggests shares in the fund may suffer a near 15% pullback ahead of expiration."
So if IB is right, an institutional trader dropped about $1 million on a large hedge to protect against a strong sell-off in industrial stocks, or XLI itself, before September 21 expiration. Owning 38,000 puts gives someone "the right, but not the obligation," to sell 3.8 million shares of XLI at $30, but would only be profitable if XLI fell below $29.74 (subtracting the premium paid) or volatility spiked (premiums rose) and the puts were flipped at a profit. XLI is currently trading at $35, so that's around a 15% pullback from here. CNBC's Option Action talked about this put trade as well (video below). And, as IB noted above, there were similar put trades in XLB, the materials ETF. OptionMonster covered the XLB put activity as well. So, down we go? Or does the trend hold?
Related: August Crash Protection in VIX Options (August 50-60 Calls Active This Week). The next FOMC meeting is on July 31-August 1, so we'll see what Bernanke says. Also, keep an eye on China, Greece, Italy, Spain, and U.S. earnings.
Anyone know why bonds (mini-bonds) and bond options aren't on all exchanges yet? Or mini-credit default swaps? Isn't credit the most important part of the capital structure? Why prevent it from being an efficient market? There should be hedges available for unsecured bond holders as well (like options for stocks).