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business newsActive Puts in XLY?
In-the-money puts used as "synthetic" shorts.
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Consumer discretionary stocks are up almost 30% from a month ago, but traders are buying puts today.
The Consumer Discretionary SPDR (XLY) exchange traded fund is off 0.19% to $21.07 today, taking a short breather after running up from its 52-week low of $15.85 reached March 6.
The options action is looking for XLY shares to return below $20. Traders were buying the June 25 puts, where more than 16,000 contracts went for $4.50.
These in-the-money puts are probably used as "synthetic" shorts. Using these reduces the time premium and increases the probability of success but does increase the capital at risk.
The implied volatility of those puts is 40%, below the average of 45%. The historical volatility is higher at 49%, up from 39% a month ago.
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