Big Printin’ – UUP Dollars, XLK Tech

by riskreversal December 6, 2016 4:13 pm • Big Printin'

Here is a couple of untied options trade that caught our attention in today’s trading:

The largest trade of the day in the options market was a buy of 100,000 (in two lots of 50,000) of the UUP June 27 calls for 38 cents ($3.8 million in premium) when the Powershares U.S. Dollar etf was trading $26.  These calls break-even at $27.38, up about 5% from the trading level, well above the March 2015 seven year high at $26.50:

[caption id="attachment_68706" align="aligncenter" width="600"]UUP 2yr chart from Bloomberg UUP 2yr chart from Bloomberg[/caption]

The breakeven would also represent a breakout above the November 2008 high! It’s impossible to know what the trader’s intentions are. Either they think the breakout happens before June, or they’re shorting UUP and assuming it doesn’t but the calls are insurance as a stop at the highs if they’re wrong.

XLK – There was a calendar put roll in the XLK technology etf as a trader sold 24k of the Jan 45 puts and bought half (12k) as many of the March 43 puts. That actually trades at a net credit based on the .35 price in January 45’s and the March 43 puts at .54. The March puts are of course at a lower strike so it could just be a trader rolling protection out at a similar net dollar amount. If the Jans are in fact opening and the trade is not against an existing long, it’s an interesting calendar as the trader is essentially fading near term risk with a closer strike a month and a half out for a lower put strike in March as either partial protection against the Jan put sale or a position that can be converted into a bearish bet following Jan expiration. But you get the point. Without knowing what the underlying position is it’s almost impossible to glean whether the trade is even bearish or bullish.