A huge trade sees limited upside in the SPDR Utilities Fund even as it pushes higher today.
The XLU is up more than 1 percent to $35.03 in afternoon trading, on pace for its highest close since April 4. The exchange-traded fund has broken higher and has closed a gap on its chart from April 9.
Almost 30,000 XLU options have changed hands today, more than 11 times its daily average in the last month. Almost all of the day's action is in a single print.
A trader sold 27,131 May 35 calls for $0.33 just below the bid price, according to optionMONSTER's systems. Open interest at the strike was just 2,739 at the beginning of the day, so this is clearly a new position.
Traders sell calls when they expect shares to stay range-bound and/or believe that the implied volatility of the options is either too high or higher than levels anticipated in the future. The calls are now in the money , so this was likely done against long shares as a covered call position. The trader could be looking to sell shares that they own but would like to earn a premium to do so. (See our Education section)
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