Ratio Spread Trades on the XLE

Shares of the Energy Select Sector SPDR Fund (XLE) are moving lower this morning by 0.53%, trading at $71.37. The ETF has been correcting lower over the past four trading sessions and is nearing the 200-day moving average.

An interesting put spread traded on the XLE early in the session. The November $70.00 put was sold 5,000 times, on the bid, for $0.91 just as 10,000 November $66.00 puts were purchased, on the offer, for $0.28.

Given the current open interest on each strike, 9,993 and 365 contracts respectively, there could be one of two things going on here. First, this could be a roll of puts out of the $70 strike and into double the amount of $66 puts. Second, this could be a fresh ratio put spread, which would voice an extremely bearish thesis.

30-day implied volatility is up 1.4% today to 20.90%; 10-day historical vol is registering 21.33%.

The Energy Select Sector SPDR Fund seeks to provide investment results that before expenses correspond generally to the price and yield performance of publicly traded equity securities of companies in The Energy Select Sector Index.

About Michael Zerinskas

Originally from Chicago, Michael J. Zerinskas began his career as an intern for a small high-frequency trading firm based at the CME; he then moved on to become Chief Options Strategist at Benzinga.com. Michael is now Unusual Activity Editor at The Options Insider, specializing in VIX, volatility, and flagging unusual activity.