Downside spread in energy fund

optionMONSTER

A complex put spread dominates today's option activity in the SPDR Energy Fund.

More than 33,000 XLE options have traded, already well above its full-session average of 21,536 for the last month. optionMONSTER systems show that almost all of the action is in a three-way trade.  

A block of 10,000 May 90 puts were bought for $1.45. At the same time blocks of 10,000 May 88 and 87 puts were sold for $1.10 and $0.85 respectively. The volume at all three strikes was more than open interest, so this was a new opening spread.

The trader takes in a $0.50 credit, which will be kept as profit if the XLE remains above $89. The maximum profit would come with the XLE between $88 and $87 at expiration in mid-May. (See our Education section)

The XLE is down 0.69 percent to $89.54. The exchange-traded fund hit an intraday high of $91.30 on Friday morning before giving up ground with the rest of the market. The stock was down at support at $86 three weeks ago.


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