U.S. Markets closed

Range-bound play in real-estate ETF

Chris McKhann (chris.mckhann@optionmonster.com)

A large position is looking for lower volatility and range-bound trading in the iShares U.S. Real Estate Fund.

The IYR rose 0.7 percent on Friday to close at $64.50. The exchange-traded fund was just shy $65 at its session high but gave up ground all day. It has been trending lower since hitting $68.26 in mid-September, a four-year high, but bounced off of support at $63 last week.

More than 88,000 IYR options traded on Friday, more than 4 times the daily average and dominated by 70,000 puts. There were some big trades in the afternoon in the December expiration, but the volume was all less than open interest. In the morning, however, our tracking systems did pick up see some unusual activity.

A trade involved 5,100 each of the June 64 puts and calls. They traded for $4 and $3.40 respectively, both at the bid prices, indicating that this was a short straddle . (See our Education section)

The position would take in the credit of $7.40, so it could profit with the IYR anywhere between $56.60 and $73.40. The trader is also betting that the implied volatility of the options is too high at 18.3 percent. The 30-day historical volatility is 11 percent, at a three-month high.

More From optionMONSTER