Big trade looks for drop in financials

optionMONSTER

An enormous put spread is positioning for a drop in the SPDR Financial Fund.

optionMONSTER systems show that 839,000 XLF options changed hands yesterday, compared to a daily average of 131,000 contracts in the last month. Most of the volume came in one four-way play.

A trader sold 95,596 August 19 puts for the bid price of $0.15 and bought the same number of August 17 puts for $0.04, with volume below the previous open interest in each strike. At the same time, the trader bought 95,596 October 19 puts for the ask price of $0.41 and sold the October 17 puts for $0.12 in volume above open interest at both strikes, indicating new positions.

The strategy was repeated just under an hour later with blocks of 73,574 for slightly lower prices.

The trader is rolling a put vertical spread out two months in time, spending an additional $0.18 for the adjustment. The resulting position would be worth $2 if the XLF is below $17 at expiration in mid-October. (See our Education section)

The XLF rose 0.85 percent to $20.14, its second-highest close. Shares dipped below $19 two weeks ago, and the exchange-traded fund was under $17 at the beginning of the year.

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