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Large call sale hits materials fund

Chris McKhann (chris.mckhann@optionmonster.com)

A large trader apparently believes that upside will be limited in the SPDR Materials Fund.

optionMONSTER's tracking systems detected the sale of 9,923 April 48 calls for the bid price of $0.50 on Friday. The volume was twice the previous open interest in the strike and topped the fund's total daily option average, clearly showing that this is a new position.

The trader is betting that gains will be limited in the XLB for the next month. The calls could have been sold naked with an initial bearish bet, but they were more likely traded against long shares in a covered-call strategy . The latter is bullish only up to $48 strike price, as it does not see any profits above that level. (See our Education section)

The XLB finished Friday at $47.37, down 0.42 percent. The exchange-traded fund was down at support at $43 in early February but hit an all-time high of $48.26 two weeks ago.

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