XLK – Technology Select Sector SPDR ETF – A massive debit put spread utilizing a total of 224,000 contracts on the Technology fund went through electronically this afternoon just after 2:00 pm in New York trading. The spread is perhaps the work of one big options market participant positioning for the price of the underlying shares to slide lower ahead of December expiration. Shares of the XLK, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Technology Select Sector of the S&P 500 Index, edged 0.17% lower to $23.14 by 2:50 pm ET. Companies represented in the Technology Select Sector Index are engaged in industries such as information technology, consulting, semiconductor equipment and products, as well as telecommunications services. The enormous transaction involved the purchase of 112,000 puts at the December $23 strike for a premium of $0.87 apiece, and the sale of 112,000 puts at the lower December $20 strike at a premium of $0.19 each. The net cost of the transaction amounts to $0.68 per contract or $7.616 million. The party responsible for the transaction is prepared to make money should shares of the fund fall 3.54% from the current price of $23.14 to breach the effective breakeven point at $22.32 by December expiration. Maximum potential profits of $2.32 per contract, or $25.984 million, are available if the XLK’s shares drop 13.57% to trade below $20.00 by expiration day. The current 52-week low on the tech-sector fund is $20.01, attained back on July 1, 2010.
LCC – US Airways Group, Inc. – It looks like some options investors are throwing in the towel on the operator of US Airways today with the price of the underlying shares descending 1.7% earlier in the session to touch down at an intraday low of $9.07. LCC popped up on our scanners in the first 20 minutes of the trading day after approximately 13,000 calls were sold at the November $10 strike for an average premium of $0.43 apiece. An additional 7,000 calls were sold at the same strike around 12:30 pm ET this afternoon at a premium of $0.41 each. Call sellers may be ditching previously established bullish stances on the stock. Roughly 20,000 calls were purchased back on September 27 at the November $10 strike for an average premium of $0.65 a-pop. If this is the case, traders are taking available premium off the table and absorbing net losses on the transaction, perhaps because they expect LCC’s shares to slip lower ahead of expiration. The sale of the contracts suggests investors see the price of the airline operator’s shares trading below $10.00 through expiration day next month.