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Why trader is selling puts in the XLY

Chris McKhann (chris.mckhann@optionmonster.com)

A large trade is betting against a collapse in the SPDR Consumer Discretionary Fund.

optionMONSTER tracking systems detected the sale of 10,000 June 38 puts for $0.02. The strike's open interest was just 242 contracts before the session began, so this is clearly a new position.

The put sale is a bet that the XLY will hold above $38 through expiration in mid-June. This is another example of the " nickel selling " strategy that we have seen of late , which has a high probability of success but also carries significant risk if it fails, especially if it is highly leveraged.
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The XLY is down 0.88 percent to $52.72 in afternoon trading. The exchange-traded fund has been trending higher from support at $45 since mid-November and hit a high of $54.41 last week.

Today's put selling pushed total option volume in the XLY past 13,000, about twice the daily average in the last month.

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