Pharma Bulls Roll With ETF Trade


The Health Care SPDR Fund hit an all-time high yesterday, and traders are betting that its pharmaceutical names still have more to gain.

Options have been quiet recently in the exchange-traded fund, but some activity in the March 44 calls and the April 45 calls stood out yesterday on OptionMonster's real-time tracking systems. Traders 3,500 March 44 contracts for $0.53 and, at the same time, bought 4,500 April 45s for $0.26.

These calls lock in the purchase price for the fund no matter how high it might rise, so they can generate leverage and provide cheap exposure to a rally.

The March contracts expire at the end of next week, so the traders rolled that position forward in time. They received a credit of $65,500 for selling those calls and can keep making money if the fund keeps climbing.

The fund rose 0.2 percent to $44.49 yesterday, its highest closing price ever. The overall session was heavily weighted to the calls, which totaled 12,600 contracts against fewer than 4,300 puts.

—By CNBC Contributor Pete Najarian

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of Najarian has no XLV positions.