Stock Options Watch: XLY, ITB, PLCE

XLY – Consumer Discretionary Select Sector SPDR Fund – Shares in the Consumer Discretionary Select Sector SPDR Fund are trading 0.60% lower today at $59.20 as of 12:15 p.m., slipping slightly from an all-time high of $59.90 reached yesterday. A large print in XLY put options during the first hour of the trading session indicates one big player is bracing for the price of the underlying to potentially decline substantially during the next couple of months. It looks like the strategist purchased a block of 31,500 of the Sep $55 strike puts at a premium of $0.41 per contract. The position may be an outright bearish bet on consumer discretionary stocks or may be a hedge to protect the value of a long position in the underlying fund. The bearish trade makes money at expiration if shares in the XLY decline 7.8% from the current price of $59.20 to trade below the breakeven point at $54.59. The XLY last traded below $54.59 at the end of June. All told, upwards of 39,000 of the Sep $55 strike puts changed hands by midday versus open interest of 5,568 contracts.

ITB – iShares U.S. Home Construction ETF – Upside call options are active on the iShares U.S. Home Construction ETF today after the National Association of Home Builders/Wells Fargo index of builder sentiment increased more than expected in July to the highest level since January of 2006. Shares in the ITB initially rallied on the back of the better than expected homebuilder confidence data, but have since erased those gains to trade down 0.65% on the session at $22.96 as of 11:55 a.m. ET. One or more options traders positioning for shares in the ITB to rally during the next four weeks appear to have purchased upwards of 8,800 calls at the Aug $23 strike for an average premium of $0.98 apiece today. The bullish position on the U.S. Home Construction ETF may pay off at expiration next month should the price of the underlying rally 4.4% over the current price of $22.96 to exceed the average breakeven point on the upside at $23.98. Shares in the ITB last traded above $23.98 back on June 19th.

PLCE – Children’s Place Retail Stores, Inc. – Options activity on children’s apparel retailer, Children’s Place Retail Stores, Inc., on Tuesday indicates one or more traders are positioning for shares in the name to move higher in the near term. Shares in PLCE rose at the start of the session, but surrendered earlier gains to trade down 1.0% on the day at $56.48 as of 12:30 p.m. ET. The most actively traded contracts on Children’s Place today are the Aug $60 calls, with roughly 1,900 lots in play versus open interest of just 33 contracts. Time and sales data suggests most of the volume was purchased in the early going at a premium of $0.75 apiece. Call buyers stand ready to profit at expiration should the price of the underlying rally 7.6% over the current level to top the breakeven price of $60.75. Children’s Place Retail Stores reports second-quarter earnings in mid-August.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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