What's behind put buying in DJIA fund

Put activity is heavy in the SPDR Dow Jones Industrial Fund as it gives up 1 percent this morning.

The Dow Jones Industrial Average is widely quoted by the media as "the market," but its exchange-traded fund doesn't see much action, especially in the options. But its volume has already matched its full-day average at more than 33,000 less than an hour into the session, and one trade stands out.

optionMONSTER's Depth Charge system that 10,000 September 113 puts traded for $3.80 against open interest of just 1 contract. The puts traded in the middle of the bid/ask spread but, given the price increase and rise in volatility, they appear to have been bought.

The DIA trades at $127.47, down exactly 1 percent on the day. It hit a three-year high of $129.12 in yesterday's session, but shares have been trending higher from a 52-week low of $103.84 in the last four months.

The put buying appears to be positioning for a pullback in coming months to levels last seen in late November. The strike and the time frame suggests that this may well be hedging to protect a long position in the DIA or its component stocks. (See our Education section)

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