As the SPDR S&P 500 Regional Bank Fund fell yesterday, a large put spread dominated its option activity.
The KRE exchange-traded fund finished the day at $25.79, down 0.58 percent as it found support around $25.50 for the third straight day. The fund fell sharply on Thursday after failing to break through resistance levels that go all the way back to its highs in April. Shares remain well off their 52-week low of $18.31 set in October.
Option volume in the fund totaled 22,797 yesterday, compared to its daily average of 3,463, and puts outpaced calls by more than 10 to 1. A single spread accounted for most of the activity.
A trader bought 10,000 March 25 puts for $0.76 and sold the same number of March 23 puts for $0.28, according optionMONSTER's Depth Charge system. The volume was multiples of open interest.
This put spread is looking for the KRE to retreat in the coming weeks, but only to levels last seen a month ago. The trader is paying $0.48 to get a potential payout of $1.52 if the KRE is below $23 at expriation. (See our Education section)
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