$XRT – Closing June Put Spread

by CC May 18, 2016 10:35 am • Commentary• Trade Ideas

Retail stocks have been under a ruthless attack with the latest casualties Costco (COST) and Target (TGT) this morning. The Retail sector has been in our sights from the short side since early March. Here was our initial trade from early March in the XRT (the S&P Retail etf):

*XRT ($44.65) Buy the June 45/38 put spread for $2
  • Buy 1 June 45 put for $2.40
  • Sell 1 June 38 put at 40 cents

At the beginning of May, following some weakness in the etf, we rolled down our long put strike in order to reduce premium risk:


  • Sell to close XRT ($43) June 45 put at $2.60 and
  • Buy to open XRT ($43) June 42 put for $0.95

Here was the trade we were left with until today:

Trade: Buy XRT ($43) June 42/38 put spread for 75 cents
  • Buy 1 June 42 put for 90 cents
  • Sell 1 June 38 put at 15 cents

I detailed this trade idea on CNBC’s Options Action on Friday May 6th:

Now with XRT $40.30, we’re going to take the trade off entirely and book the profits:


Sold to close the XRT ($40.30) June 42/38 put spread at $1.80 for a $1.05 profit

There is likely more to go, but the XRT is getting into oversold territory, and once WMT’s earnings are out of the way tomorrow morning, the sector might be full up with bad news, setting up for a bit of a dead cat bounce. I might consider a re-short near $42, and a target of $38 on the downside.

From Bloomberg
From Bloomberg