XLF – Financial Select Sector SPDR – Shares of the XLF, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index, rallied 1.3% to $14.64 by 1:25 pm (ET). Early in the trading session one cautiously optimistic options player rolled a large-volume put position from the June contract to the July contract. The investor sold 50,000 in-the-money puts at the June $15 strike for a premium of $0.54 apiece in order to purchase the same number of in-the-money puts at the July $15 strike for a premium of $0.86 each. The net cost of the calendar roll amounts to $0.32 per contract. The individual responsible for the transaction is likely extending downside protection originally established to protect the value of a massive position in shares of the underlying fund. It is unclear how much the trader paid initially to purchase the June $15 strike puts. But, in isolation, the $0.32 net cost incurred today to roll the puts to the July contract creates an approximate breakeven price of $14.68 for the investor.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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