Bearish Options Activity Heats Up In The SPDR S&P Retail ETF (NYSE: XRT)

“(XRT)–SPDR S&P Retail ETF–Bearish put butterfly spreads dominated options activity on the (NYSE: XRT), an exchange-traded fund that replicates the performance of the S&P Retail Select Industry Index, today indicating some options players are expecting shares of the underlying fund to slip ahead of May expiration. Shares of the ETF are down slightly, by 0.05%, to $42.66 as of 11:55 am (EDT),” Andrew Wilkinson Reports From Forbes.

Wilkinson continues to report, “At least three distinct butterfly spreads were established on the (NYSE: XRT) thus far in the session. Two of the trades utilized the same three strike prices, while the third and smallest put fly spread broke away from the pack by using different strikes. The more popular parameters engaged by bearish butterfly traders involved the purchase of a total of 20,000 puts at the May $34 strike for a premium of $0.04 apiece [wing 1] and the purchase of 20,000 puts at the higher May $40 strike for $0.46 premium per contract [wing 2]. The body of the butterfly was transacted at the central May $37 strike where 40,000 puts were shed for a premium of $0.12 each. Net premium paid for this trade amounts to $0.26 per contract. Therefore, investors putting on this bearish transaction are prepared to accumulate maximum potential profits of $2.74 per contract if shares of the underlying fund decline 13.25% from the current price to settle at $37.00 at expiration.”

“Traders start to make money as long as the XRT’s share price dips below the upper break-even point at $39.74. A similar, albeit smaller, butterfly spread was also initiated in the May contract but yields maximum benefits to the investor responsible for the trade if shares slip to $38.00 by expiration rather than the $37.00 strike price described in the previous transaction. In this put butterfly trade, the investor purchased 3,000 puts at the May $40/$36 strike prices [wings 1 and 2] for a gross premium of $0.55 apiece, and sold 6,000 puts at the central May $38 strike for $0.19 apiece. The net premium paid for this trade amounts to just $0.17 per contract and yields maximum potential profits of $1.83 per contract should shares of the retail ETF drop to $37.00 by expiration day next month,” Wilkinson Reports.

We have put together some more details on the SPDR S&P Retail ETF (NYSE: XRT) including a snapshot of May’s options activity below:

The investment ETF (NYSE: XRT) seeks to replicate as closely as possible, before expenses, the performance of the S&P Retail Select Industry Index. The fund uses a passive management strategy to track the total return performance of the index. The index represents the retail sub-industry of the S&P Total Market index. The fund is nondiversified.

TOP 10 HOLDINGS ( 18.93% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Footlocker Inc. (FL) 2.04
Whole Foods Market, Inc. (WFMI) 2.03
The Children’s Place Retail Sto (PLCE) 2.00
Sears Holdings Corporation (SHLD) 1.96
HSN, Inc. (HSNI) 1.84
Officemax Incorporated (OMX) 1.84
Netflix, Inc. (NFLX) 1.81
Limited Brands, Inc. (LTD) 1.81
SuperValu Inc. Common Stock (SVU) 1.80
The Dress Barn, Inc. (DBRN) 1.80

 

Chart for SPDR S&P Retail (XRT)

CALL OPTIONS Expire at close Fri, May 21, 2010
 
Strike Symbol Last Chg Bid Ask Vol Open Int
36.00 XRT100522C00036000 5.46 0.00 6.70 7.05 0 13
37.00 XRT100522C00037000 5.49 0.00 5.80 6.00 0 13
38.00 XRT100522C00038000 4.85 0.00 4.90 5.05 35 132
39.00 XRT100522C00039000 3.97 0.00 4.00 4.15 17 73
40.00 XRT100522C00040000 3.05 0.00 3.20 3.30 21 571
41.00 XRT100522C00041000 2.21 Down 0.01 2.42 2.46 48 8,670
42.00 XRT100522C00042000 1.63 0.00 1.71 1.73 175 15,746
43.00 XRT100522C00043000 1.12 Up 0.12 1.10 1.13 449 1,940
44.00 XRT100522C00044000 0.64 0.00 0.65 0.66 120 11,629
45.00 XRT100522C00045000 0.32 Up 0.01 0.34 0.36 38 899
46.00 XRT100522C00046000 0.14 0.00 0.15 0.17 50 313
47.00 XRT100522C00047000 0.06 0.00 0.06 0.08 40 49
 
PUT OPTIONS Expire at close Fri, May 21, 2010
 
Strike Symbol Last Chg Bid Ask Vol Open Int
35.00 XRT100522P00035000 0.06 0.00 0.04 0.06 39 39
36.00 XRT100522P00036000 0.09 0.00 0.07 0.09 3,500 512
37.00 XRT100522P00037000 0.10 Down 0.04 0.10 0.12 45,589 694
38.00 XRT100522P00038000 0.17 Down 0.03 0.16 0.18 7,265 814
39.00 XRT100522P00039000 0.30 Up 0.03 0.25 0.27 84 4,222
40.00 XRT100522P00040000 0.42 Down 0.01 0.39 0.41 28,808 3,483
41.00 XRT100522P00041000 0.59 Down 0.06 0.59 0.61 1,133 8,468
42.00 XRT100522P00042000 0.89 Down 0.10 0.89 0.90 13,052 19,679
43.00 XRT100522P00043000 1.36 Down 0.01 1.28 1.31 65 2,352
44.00 XRT100522P00044000 1.85 Down 0.17 1.81 1.84 104 464
45.00 XRT100522P00045000 2.50 Down 0.19 2.50 2.54 329 568
46.00 XRT100522P00046000 3.40 Down 0.75 3.30 3.40 114 1

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