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Huge hedge on real-estate fund

Chris McKhann (chris.mckhann@optionmonster.com)

The iShares U.S. Real Estate Fund rebounded at the end of last week, and one investor is apparently buying some big protection.

About 77,600 IYR options changed hands on Friday, more than double its daily average for the last month. The bulk of that volume was in a single trade.  

optionMONSTER systems show that a trader sold 19,500 October 62 puts for the bid price of $0.10 against previous open interest of 59,415 and bought the same number of the November 61 puts for the ask price of $0.54 in volume far above that strike's open interest of 1,235. Shortly after, he or she sold 10,000 more of the October puts for $0.10 and bought 10,000 additional November puts for $0.51.

The trader is rolling a large put position out one month to a lower strike price. The move is likely the extension of a hedge on a long-stock position. (See our Education section)

The IYR rose 0.96 on Friday to close at $65.23, the second straight day of gains after bouncing at the $63 level. The exchange-traded fund was below $62 at the start of September.

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