Large put spread targets retail ETF

Chris McKhann (chris.mckhann@optionmonster.com)

The SPDR S&P Retail Fund has risen to record levels, but one trader apparently believes that it is due for a pullback.

optionMONSTER's Depth Charge system shows that a trader bought 5,000 June 77 puts for their ask price of $1.23 and sold 10,000 June 74 puts for their bid price of $0.54. The volume was well above the previous open interest of around 2,300 contracts in each strike, indicating that this is a new vertical spread .

The spread--also known as a ratio because one leg is twice as large as the other--cost just $0.15 to open, which is the maximum amount at risk if the XRT remains above $77. The maximum gain would be realized if it is right around $74 at expiration, as there is a time decay factor involved in the trade as well. (See our Education section)

The XRT finished yesterday at $78.11, up 0.46 percent, a record closing high. The exchange-traded fund was down at $54 at the start of the month, but it has been trending higher from support at $60 from the very end of 2012.

Yesterday's total option volume in the XRT topped 30,000, which is more than twice its daily average for the last month.

More From optionMONSTER