XLY, XLI - Massive Bet on Market Spasm in Key Industries

Discussion in 'Options' started by livevol_ophir, Aug 20, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    XLI (Industrials) is trading $29.07, with IV30&#8482 up 4.5%. XLY (Consumer Discretionary) is trading $30.73 with IV30&#8482 up 1.0%.

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/TG6WYvf0zRI/AAAAAAAAEN0/AWprw15JIgE/s1600/xli_summary.gif">
    <img src="http://1.bp.blogspot.com/_hMry1m7UF10/TG6WY505y1I/AAAAAAAAEN8/9o6LMRyik1o/s1600/xly_summary.gif">

    Cathy Clay, floor trader extraordinaire on the NYSE ARCA brought this order flow to my attention.

    Yesterday two huge trades crossed the tape in the Jan '11 19 puts; same lines, same month for both. The top trades from yesterday are included below (<a href="http://livevol.blogspot.com/2010/08/xly.html">in the article</a>). First XLI, then XLY below it.

    The Options Tab for both are included (<a href="http://livevol.blogspot.com/2010/08/xly.html">in the article</a>). Note the OI in those lines (first XLI, then XLY).

    Both lines are 100k+ long those puts. These are massive bets on a downturn and a vol jump.

    The XLY line is long $190,000/vol in vega. The XLI line is long $240,000/vol in vega. Taken together, these bets are long $430,000/vol in vega. That's almost half a million for each point vol moves in those puts.

    The 52 wk ranges on these two are:
    XLY [$25.40, $36.13]
    XLI [$24.29, $33.46]

    Make no mistake, this is a bet on a spasm in the financial markets before year end. Note also the EFA (Europe, Australia and Far East) order flow; big put buyers and spreaders. Jeff Kearns of Bloomberg brought this to my attention and will have a detailed article about EFA coming out soon.

    At the end of Nov (ish) in 2008:
    XLY dipped into the $16 area; XLI into the $19 area. Hmmm.

    This is trade analysis, not a recommendation.

    Details, trades, vols, vegas here:
    http://livevol.blogspot.com/2010/08/xly.html
     
  2. livevol_ophir

    livevol_ophir ET Sponsor

    Interesting that the strike chosen was right around where it went in 2008 during the crash.