EPI, XRT Options – Unusual Trading Activity – September 22, 2014
This week we’re taking a look at unusual options trading activity in WisdomTree India Earnings ETF (EPI) and SPDR S&P Retail ETF (XRT).
As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week:
WisdomTree India Earnings ETF (EPI)
The stock market in India has had a good year. But, put buyers could be preparing for a bearish turn.
EPI, a popular India ETF, is currently trading for $22.69, up 32% on the year. The price is 52% above the 52-week low of $14.91 and is 4% below the 52-week high of $23.64.
A large block of November puts hit the wire in EPI today. 10,000 November 23 puts were bought for $0.85 per contract. It looks like an opening position.
A put purchase like this could be a few different things. It could be a straight up bearish play. It could be a hedge against a selloff in India stocks. Or, it could be locking in gains against a long stock/ETF position.
SPDR S&P Retail ETF (XRT)
An interesting bearish trade suggests the retail sector could be in for a rough month.
XRT is trading for $87.16. The shares are just 3% below the 52-week high of $89.83 and 14% above the 52-week low of $76.34.
A trader purchased 10,000 October 87.50 puts for $1.50 while simultaneously selling 20,000 82.50 puts for $0.30. The total cost of the trade was $0.90 per spread.
This type of spread is called a ratio spread. It functions similar to a standard put vertical spread. The strategy’s max gain is still at 82.50, but the ratio aspect of the trade means the trader will have to get long shares if the stock drops below the short strike (on expiration or assignment). However, selling twice as many puts at the lower strike lowers the cost of the trade.
More Options Ideas…
That wraps up this week’s unusual options trading and volume…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!
Yours in Profit,
Gordon Lewis
Category: Unusual Options Trading Activity
