Long-term spread is bullish on utilities

optionMONSTER

A long-term trade is looking for the SPDR Utilities Fund to move higher in the next two years.

optionMONSTER systems show that more than 54,000 XLU options traded on the day, compared to daily average of just 13,600 in the last month. Dominating the action was a January 2015 call spread.

A trader bought 24,611 of the 38 calls for the ask price of $0.80 and, seconds later, sold the same number of the 40 calls for $0.36. The volume was well above the previous open interest at each strike, indicating new activity.

This vertical spread cost the trader $0.44, which is the amount at risk if the XLU remains below $38 at expiration in two years. The maximum gain of $1.56 would be made if shares are above $40 at that time. (See our Education section)

The XLU finished the day at $35.21, down fractionally on the day and in the middle of its recent range. The exchange-traded fund set a 52-week high of 38.54 early August.

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