Call buyers turning to materials ETF


The recent market selloff has brought materials stocks lower, and now they're gaining some attention.

optionMONSTER's Heat Seeker system yesterday detected unusual activity in the Material Select Sector SPDR Fund, which has fallen from near $40 to about $37.50 in the last month. Traders focused on the April 40 calls, paying mostly $0.17 on more than 5,000 contracts.

Those options lock in the price where XLB stock can be bought, so they will generate some nice leverage if the fund rallies. But they will expire worthless if the shares don't move by mid-April. (See our Education section)

The XLB opened higher, stayed green all day, and closed higher by 1.07 percent at $37.75. The exchange-traded fund includes large holdings in companies such as Monsanto, DuPont, Dow Chemical, and Freeport-McMoRan Copper & Gold.

The fund's total option volume yesterday was more than triple its daily average for the last month. There were also some puts traded, but those appear to be closing positions.

Disclosure: I own XLB calls.

(A version of this post appeared on InsideOptions Pro yesterday.)

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