Guess Who’s Shopping in the Retail Space


Bears are shopping for downside in the retail space after a rough start to the month.

A block of 40,000 December 47 puts was purchased this morning in SPDR S&P Retail ETF (XRT) for $1.08. It was one of the largest transactions in the entire market.

Puts can make money to the downside because they fix the price where a security can be sold. They can also profit from increased volatility, especially when contracts are out of the money and have several months to expiration. (See our related post on Vega.)

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XRT rose 0.29 percent to $48.50 in afternoon trading, but has lost about 5 percent of its value so far in October. The fund has wide exposure to firms across the sector, with no company accounting for more than 1.5 percent of its portfolio.

Today’s put buying is especially interesting the options expire on December 21, so they’ll cover almost all the holiday shopping season. They also provide exposure to the Commerce Department’s retail-sales report on Monday, October 15, and the quarterly earnings in early November.

Overall option volume in XRT is almost triple the past month’s average, with puts outnumbering calls by a bearish 15-to-1 ratio.

SPDR S&P Retail ETF (XRT), with 50-day moving average.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.