Technology Select Sector SPDR Fund Options (XLK): Unusual Trading Activity

| September 19, 2012 | 0 Comments

XLK option activityOptions in the Technology Select Sector SPDR ETF (XLK) experienced an enormous amount of unusual trading late yesterday afternoon.

The stock closed up fractionally at $31.63, with gigantic options trades made on the bullish side. 

One such trade was made just after mid-day. 

An option trader came in and made the largest option trade on the XLK in months.  The purchase he made was on straight up calls.  This bullish strategy is made by buying one call option with no other options associated with them.  This gives the trader unlimited upside profit potential. 

In this very aggressive trade, the trader bought just under 50,000 contracts of the XLK September $31 strike call options for an average price of $0.60.  And with only three days left until expiration, these options will now start moving dollar for dollar.

So, the total investment on the trade is $3,000,000.  That’s a few bucks!

However, I believe this is a really cheap way to make a short term bet on a sector that has been on fire along with the rest of the market.

In addition, according to our tracking system, this trade carries a greater than 75% probability the trader will earn at least some profit.

But why such a short-term bet on technology?

For those of you who don’t know, XLK is an ETF.  Its largest holdings include stocks like Apple (AAPL), Microsoft (MSFT), IBM (IBM), and Oracle (ORCL).

It seems clear that yesterday’s huge trade on the XLK comes on the heels of the major move this sector has experienced over the last few months. 

All of the major stocks in this ETF are up considerably, especially Apple.  And it seems there’s no stopping it.  Actually, during the last few months, it seems most of these stocks have been in a major uptrend.  

So, with the technology sector at akey technical point, option traders think it’s the perfect time to exercise a little aggressive behavior.

It’ll be interesting to see if they’re right!

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.