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Downside play in homebuilder ETF

Chris McKhann (chris.mckhann@optionmonster.com)

Traders are positioning for a potential drop in the SPDR S&P Homebuilders Fund.

More than 73,000 XHB options change hands this morning, seven times the daily average over the last month. Dominating the volume is action in one strike

Two blocks of 20,000 and 45,000 December 26 puts were bought for $0.42 in trades 40 minutes apart, according to optionMONSTER's Depth Charge tracking system. These are clearly new positions, as previous open interest in the strike was a mere 158 contracts.

This put buying isn't tied to any trading in the underlying shares identified by our systems today, so it could be an outright bearish bet. Alternatively, however, it could be the work of an investor who is hedging a long position in the XHB or in its component stocks. (See our Education section)

The XHB is down 1.32 percent to $32.11 this morning, outpacing the broader indexes to the downside. The exchange-traded fund was down at support around $30 three weeks ago but tested overhead resistance at $33 on Monday.


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