XLE, SLV Options – Unusual Trading Activity – April 7, 2014
This week we’re taking a look at unusual options trading activity in Energy Select Sector SPDR (XLE) and iShares Silver Trust (SLV).
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:
Energy Select Sector SPDR (XLE)
An interesting spread occurred today in the premier energy sector ETF.
XLE is currently trading for $89.04. The price is 23% above the 52-week low of $72.14 and is just 2% below the 52-week high of $91.30.
A strategist purchased 10,000 May 90 puts while simultaneously selling 10,000 May 88 puts and 10,000 May 87 puts. The complex put spread collects a $0.50 credit per spread, which will be kept in full if XLE closes above $89 at May expiration.
The trade will be maximized if XLE closes between $87 and $88 on expiration. Basically, the long part of the spread would be optimized while minimizing the damage from the short $88 strike. It’s quite an interesting strategy.
iShares Silver Trust (SLV)
A trader is betting on short-term upside in silver (using the most popular silver ETF).
SLV is trading for $19.10 and is up over 2% for the year. The shares are up 8% from the 52-week low of $17.75 and are 30% below the 52-week high of $27.14.
The trader purchased 5,500 April $18.50 calls expiring at the end of this week. The price paid for each call was $0.96. The calls may seem expensive since they expire at the end of the week, but keep in mind, the options are currently in the money.
Basically, this is a flat out bullish bet on silver for the current week. It’s a fair amount of money to spend on options expiring in less than five days. However, the trader can always choose to roll out the options to the following week if necessary.
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
