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Industrial fund sees mixed call action

Chris McKhann (chris.mckhann@optionmonster.com)

The SPDR Industrial Fund saw mixed call activity as it ended last week at five-year highs.

A trader bought 13,362 January 38 calls for $1.61 against open interest of more than 34,000 on Friday, according to optionMONSTER systems. At the same time, he or she sold 21,741 February 40 calls for the bid price of $0.35 in volume that was far above open interest of 2,095 at that strike, indicating new activity.

The trader was rolling a January short-call position, which expired at the end of Friday's session, to the later-dated higher strike. The options were likely traded against a long stock as part of a covered-call strategy or other some other type of position that is looking for lower volatility . In either case, the trade is betting that any stock gains will be capped at the $40 level.

In a separate and apparently unrelated transaction later in the day, a trader sold 4,558 January 39 calls against open interest of 29,742 and bought 11,142 of those February 40 calls for $0.44. This trader appears to be rolling a long-call position forward by a month to the higher strike, betting that the stock will close above $40 at expiration. (See our Education section)

The XLI rose 0.81 percent on Friday to close at $39.93, just off its session high. These are the exchange-traded fund's best levels since its all-time highs just shy of $42 at the end of 2007.  

More than 62,000 XLI options traded on Friday, compared to a daily average of 14,000. optionMONSTER systems show that a call ratio diagonal makes up most of that action.

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