XRT – SPDR S&P Retail ETF – The purchase of a debit put spread on the XRT, an exchange-traded fund designed to mirror the performance of the S&P Retail Select Industry Index, suggests one options strategist expects the fund’s share price to decline ahead of September expiration. Shares of the XRT are currently trading lower by 1.15% to stand at $39.77 just before 1:00 pm (ET). The bearish investor appears to have purchased 3,000 puts at the September $38 strike for a premium of $2.16 each, spread against the sale of the same number of puts at the lower September $34 strike for $1.04 apiece. The net cost of establishing the spread amounts to $1.12 per contract. Thus, the trader stands ready to profit if shares of the ETF fall 7.26% from the current price to breach the effective breakeven point to the downside at $36.88 by expiration. Maximum available profits of $2.88 per contract pad the investor’s wallet if, by September expiration, the XRT’s shares are down 14.5% to trade at or below $34.00 each.
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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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