With the broad market finding its footing, a few percent below unchanged on the year, I might have thought that some of the early year “defensive” out-performers like utilities and telco stocks might have lost some of their luster. This is clearly not the case though with the XLU, the Utilities Select etf today making new 52 week highs, up 10.5% on the year, and quickly approaching its all time high made in early 2015:
There was some interesting options volume in the sector. First in the XLU, it looked like an over writer rolled up some calls they were short against long stock. When the XLU was $48 a trader bought to close 26,000 June 46 calls for 2.70 and sold to open 33,000 June 48 calls at 1.39. This is probably not a bad strategy in a usually low vol etf like the XLU that has a dividend of 3.7%.
Also in FE, FirstEnergy, a $15 billion market cap company that pays a dividend that yields 4%. When the stock was $26.32 a trader sold to close 29,000 July 33 calls at $4 and bought to open 29,000 July 37 calls for 1.60 to open. The trader is rolling up a bullish view. While the XLU is making new 52 week highs, and breaking out, FE has a fairly different look to it technically as it has been in a fairly steady downtrend since its 2012 highs, and is now approaching its trend. After such a sharp short term run, defined risk in long calls could be the way to play, or merely lever up an existing long: