Considering Our Options – All My X’s

by CC January 15, 2015 2:03 pm • Commentary

It happened over the span of a month or two but we ended up with quite a few short delta trades in sector ETFs that started with the letter X.

Let’s recap what we have on and what we’re looking for from here on out. First, on st we looked to fade the recent strenght in retail stocks with a put calendar in XRT:

XRT ($92.93) Buy Dec / March 90 Put Calendar for 1.70

-Sell 1 December 90 Put at .70

-Buy 1 March 90 Put for 2.40

In mid December, with the ETF lower than our entry we got the chance to roll the short put portion of the trade and established a very cheap vertical spread in March:

By CC and Dan

ACTION – Bought to close the XRT (92.70) Dec 90 put for .20, sold to open the March 85 put at 1.65
New position – Long the March 90/85  put spread for .25

The ETF is now ever so slightly lower than that roll and the March vertical is worth about 1.25. This is in a really good spot to be a big winner based on our 25 cents in risk. But it is still out of the money so we’ll have to keep an eye on it if it holds these levels. Time is on the side of the trade as far as having an opportunity for this to break lower and be in the money. But the fact that that’s more than 2 dollars away means time is not on its side as far as decay. So that’s how we’ll manage that, decay versus opportunity for a big winner on something that is already profitable.


The next X trade was on targeted U.S. Financial stocks. Here was the trade:

Trade: XLF ($24.40) Buy Feb 24/21 Put Spread for .55

-Buy to open Feb 24 put for .65

-Sell to open Feb 21 put for .10

The ETF is a little more than a dollar lower and is in the money. Mark to market it’s worth about .90 here, so a decent winner. Intrinsically it’s worth a little less than that. Decay isn’t so much a big factor here as much as technicals and the annoyance of being really right so far in bank earnings but not having the ETF crater because of its mix of components. This is probably one that we’ll be quick to take profits in on the next move lower. We’d love to squeeze a double out of this one but would be more than happy to just have a nice trade, so we’ll see how the stock reacts here at its 200 day moving average.


The final X trade was in the utilities, XLU. We did this trade on

TRADE: XLU ($48.50) Buy to Open March 48 / 44 Put Spread for $1.00

-Buy to open 1 March 48 put for 1.35

-Sell to open 1 March 44 put at .35

XLU has held up fairly well considering the rest of the market. It’s down slightly from our entry and the structure is a small winner at about 1.20 mark to market versus the 1.00 entry. This is the one with the most time to play out obviously, so we’ll be patient on this. But it does show nice relative strength so