Unusual Options Activity In Technology Select Sector SPDR ETF $XLK

| December 9, 2015 | 0 Comments

technologyUnusual Options Activity In Technology Select Sector SPDR ETF $XLK 

As many of you know, unusual options activity 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…

Technology Select Sector SPDR ETF $XLK is the most popular sector ETF for trading the technology sector.  The ETF trades over 10 million contracts a day on average.  For a good description of the fund, follow the link.

$XLK is trading at $44.15, up 9% for the year.  That’s just 1% below the 52-week high and 42% above the 52-week low.

So what does unusual options activity in XLK tell us?

As 2015 quickly draws to a close, we can start to look back at the sectors that have performed well, and those that have done not so well.  You often hear about how poorly the energy sector has done (which is entirely true), but on the other side, technology stocks have had quite a year.

Compared to the S&P 500 in general, the tech sector has outperformed by about 200%.  Granted, the sector is dominated by several huge companies that have done very well.  Nevertheless, if you were only invested in tech this year, you would have done quite well for your portfolio.

Here’s the deal…

Recently, a substantial amount of calls traded in XLK.  Keep in mind, a call option makes money when the underlying stock goes up before its expiration date.

To be more specific, a trader bought a block of 28,750 45.50 calls expiring in December.  The price paid for each contract was $0.08. And, the block was part of an exchange-wide purchase making up around 70,000 contracts.

Here’s the chart of $XLK:

unusual option activity, a chart of XLK

XLK has done very well since recovering from the August correction.  As you can see, the ETF has remained above the 200-day moving average since breaking through in October.

The trade could be an indication that the tech sector is going to make a run at new highs this year (prior to the end of the year).  While it only needs to go up a $1 to reach the option strike, there’s only about 10 days until expiration.   Still, the buyer only paid 8 cents.  It won’t take much for the options to double or triple in price.  And, 70,000 contracts means a small move could result in big gains.

More Options Trading Ideas…

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!

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

Tags: , , , ,

Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

Leave a Reply

Your email address will not be published. Required fields are marked *