Trade sees pullback in homebuilders

optionMONSTER

The SPDR Homebuilders Fund has climbed to five-year highs, but a put spread tops its option activity today.

The XHB is down 1.45 percent to trade at $25.49 this morning. The exchange-traded fund opened at $25.94, its highest level since September 2007. Shares have more than doubled from the low at the start of October last year and finally broke through resistance around $22 a month ago.

A trader bought 3,906 October 25 puts for the ask price of $0.63 and sold the same number of the October 23 puts for the bid price of $0.17. The volume at each strike was more than open interest at the start of the session, so this is a new position.

The put spread cost the trader $0.46, which is at risk if shares remain above $25 in five weeks. If the shares are below $23, the spread will profit by $1.54 at expiration. (See our Education section)

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