The SPDR Health Care Select Sector exchange-traded fund is less than a sneeze from its recent highs, and some bulls are looking for it to pop.
Upside activity lit up OptionMonster’s tracking systems yesterday, with heavy buying in the June 37 calls. One huge block of 23,000 contracts priced for $0.31.
Calls lock in the price investors must pay to buy shares in the fund, which has stakes in major names such as Johnson & Johnson, Pfizer, Abbott Laboratories, and Merck. The calls can generate significant leverage if it rallies, but will expire worthless if the fund doesn’t move.
Shares of the SPDR Health Care Select Sector ETF closed higher by 0.97 percent to $36.42 yesterday. Most of the companies in the index have attractive valuations and dividend yields.
Total option volume was 10 times greater than average in the name, and calls outnumbered puts by more than 3 to 1.
—Najarian has no positions in XLV.
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