Analyzing the ETF Market

SPDR Oil Exploration and Production Fund (XOP) added 93 cents to $44.90 after crude oil gained $2.82 to $82.50 per barrel. XOP, which holds shares of energy-related companies like Exxon, Chevron, and ConocoPhillips, is on a three-day 12.3 percent run higher. Options on the ETF were actively traded today. The flow included 36,000 puts and 12,000 calls. The top trades were part of a volatility play, in which the strategist bought 10,000 December 47 calls on XOP at $3.65 and bought 10,000 December 30 puts at 71 cents. That is, a Dec 30 – 47 strangle was bought at $4.36, 10000X. It might be a closing trade, as open interest is sufficient to cover in both contracts. If opening, it's a bet that shares of energy-related companies will see high volatility through mid-December. This strangle has a bullish bias, as the Dec 30 puts are relatively deep out-of-the-money compared to the Dec 47 calls.

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