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Friday, December 9, 2022


Bearish Options Trade Bets XLU Rally Running On Empty


Today’s tickers: XLU, HPQ & QLIK

XLU – Utilities Select Sector SPDR – A large trade in XLU puts yesterday suggests at least one options market participant is preparing for the strong run in the price of the underlying to run out of juice in the near future. Shares in the Utilities Select Sector SPDR ETF are up 0.20% today at $41.00, on the heels of a 17% move to the upside since the end of 2012. The biggest print in XLU options yesterday was the purchase of a block of 50,000 Jun $40 strike puts at a premium of $0.51 each. The bearish strategy starts making money if the price of the underlying slips 1.2% from the current price of $41.00 to breach the breakeven point on the downside at $40.49.

HPQ – Hewlett-Packard Co. – Weekly calls changing hands on Hewlett-Packard today look for shares in the name to rally in the near term. The stock is up 3.0% this afternoon to stand at $20.24 as of 12:25 p.m. ET. Shares in HPQ had been on a tear, rallying more than 60% during the first three months of 2013 to a six-month high of $24.05 on April 1st. Since then, however, the computer hardware maker’s shares have declined roughly 15% to reach the current level. Options traders positioning for shares to move higher next week appear to be buying the May 03 ’13 $20 and $21 strike calls this morning. It looks like traders snapped up 2,600 of the $20 strike calls at an average premium of $0.33 each and around 3,200 of the $21 strike calls for an average premium of $0.16 apiece. Call buyers stand ready to profit at expiration next week in the event that shares in HPQ exceed average breakeven points at $20.33 and $21.16, respectively. HPQ reports second-quarter earnings after the close on May 21st.

QLIK – Qlik Technologies, Inc. – Shares in the maker of business intelligence products are popping on Friday, up more than 13% at $27.04 as of 1:00 p.m. in New York, after the company posted a narrower than expected first-quarter loss after the close on Thursday. Some options traders appear to be positioning for the price of the underlying to extend gains during the next couple of months, with far out-of-the-money June expiry calls changing hands in the early going today. The Jun $31 strike calls traded roughly 2,300 times during the first half of the trading session versus open interest of just 269 contracts. It looks like most of the calls were purchased at a premium of $0.80 each within 10 minutes of the opening bell this morning. The bullish strategy makes money if shares in Qlik Technologies rally another 17.6% over the current price of $27.04 to top an average breakeven point and fresh 52-week high of $31.80 by June expiration. The Jun $32 strike calls also attracted some attention today, with some 520 lots purchased this morning at an average premium of $0.50 per contract.


Caitlin Duffy
Equity Options Analyst

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