Huge volume in XLF

T

TraderSU

Ref: http://www.cnbc.com/id/33289282/site/14081545

The ETF saw some huge positioning in the November 16 calls, where more than 162,000 contracts traded in a strong buying pattern for $0.42 to $0.52, according to OptionMonster's proprietary tracking systems. That was roughly six times the open interest at the strike, indicating newly opened positions, and dwarfed the average call volume of just 2,743 a day in the last month.

The XLF and closed yesterday at $15.36, up 0.79 percent on the session. The fund has struggled to stay above $15 and has not crossed $16 since Nov. 5, 2008.

The stock would need to rise at least 7 percent for the calls purchased yesterday to turn a profit before the contracts expire on Nov. 20.

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Options gurus - How to interpret this piece of information?

I'm also thinking about the seller who sold this big position. Isn't he supposed to be smarter than buyer?

- Options NooB
 
Quote from TraderSU:
-----The stock would need to rise at least 7 percent for the calls purchased yesterday to turn a profit before the contracts expire on Nov. 20.
-----How to interpret this piece of information?
-----I'm also thinking about the seller who sold this big position. Isn't he supposed to be smarter than buyer?
More...
1) You're improperly focusing on the expiration breakeven price. It's better to focus on the option's delta and how the option value fluctuates with respect to price changes in the underlying ETF day-by-day until expiration.
2) Somebody wants to put on a big trade before GS's earning announcement?
3) With "larger" trades, each party to the trade knows what it is doing. Instead of being a "naked outright", it's probably hedged with other stocks and/or options. :cool:
 
maybe the position itself is an hedge, if someone is shorting bank stocks left and right because he thinks upcoming profits are going to be bad... It would make sense that he would want some protection.
 
Quote from nazzdack:


3) With "larger" trades, each party to the trade knows what it is doing. Instead of being a "naked outright", it's probably hedged with other stocks and/or options. :cool:
More...

I see; the buyer could be short on banks and wanted to save his back if market runs up against him. Probably a nervous but careful BEAR and news is not bullish.

Thanks :-)
 
Options' OI and Vol won't help you that much. They are much less useful than futures' OI and Vol and Stock's Vol.

Also remember they only reflect what have happened in the past, not what is happenning now or what will happen tomorrow.
 
Heck maybe the house that initiated the trade shorted them to open. You just dont get to know and therefore its interesting to note but not of any particular value.
 
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