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What's behind put surge in retail ETF

Chris McKhann (chris.mckhann@optionmonster.com)

A complex put trade dominated yesterday's option activity in the SPDR Retail Fund.

More than 140,000 XRT options traded in the session, compared to its daily average of 8,617 in the last month. Most of the volume was in two near-term put spreads.

First a trader sold 20,000 November 81 puts for the bid price of $0.11 and bought 40,000 November 77 puts for $0.04. The volume in each strike was above previous open interest, showing that this is new activity.

Shortly after, the trader bought 20,000 November Weekly puts a week farther out at the 84 strike for $0.87 and sold 40,000 November Weekly 82 puts for $0.35. The open interest at those two strikes was 112 and 28 respectively, so that is a new ratio spread . (See our Education section)

The trader is rolling the ratio spread out in time as the expiration approaches. He or she gains an additional  week from the regular expiration while their maximum gain would now come from a pullback to $82.

The XRT fell 0.81 percent to $84.70 yesterday after hitting a new all-time intraday high of $85.63 in the morning. Shares of the exchange-traded fund were down at $82 three weeks ago. 

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