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Oil-drilling fund draws big downside bet

David Russell (david.russell@optionmonster.com)

One big investor is nervous about a collapse in the energy sector.

optionMONSTER's Depth Charge tracking program detected the purchase of about 37,000 April 50 puts in the SPDR Oil & Gas Exploration & Production fund. Most of them priced in a single large block for $0.81 and volume was more than 130 times open interest in the strike.

The XOP is trading at $57.18, down 1.82 percent today and 5 percent in the last three sessions. The exchange-traded fund, which has a wide exposure to oil drillers and refiners, is dropping amid concern about economic weakness in Europe and China.

Today's put buyer is positioning for a potential plunge all the way back down to $50, a level that the XOP hasn't seen since mid-December. Even if it doesn't go that low, the contracts will make money from a sharp drop in the next few sessions because it would likely drive up volatility . (See our Education section)

Overall option volume in the XOP is triple the daily average so far today, with puts outnumbering calls by 65 to 1, according to the Depth Charge.

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