Retail stocks are at a critical juncture at this point, and along with that comes the largest options trades of the day.
The S&P Retail SPDR is down 1.58 percent Tuesday to $26.23. Shares sit at support and above the 200-day moving average, but may be completing a bearish "head and shoulders" top that would bring the price down to that support level near $23.
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The first set of big trades is a bearish "butterfly spread" in July. In one trade, 25,000 of the July 22 puts were bought for $0.05, 50,000 of the July 24 puts were sold for $0.10, and 25,000 of the July 26 puts were bought for $0.50.
This butterfly trade cost $0.35, which is the maximum risk. The trade will take a maximum profit of $1.65 if XRT is right at $24 at July expiration.
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Another set of large related trades followed roughly an hour later, as another 20,000 of those July 24 puts traded for $0.13, and 10,000 of the July 26 puts for $0.61. It appears that in this case that the July 24 puts were bought and the July 26 puts sold. This may well have been a closing of some of that earlier position, with a profit of $0.14 — not bad for an hour's wait.
Overall the feeling of this trade is decidedly bearish, at least in the near term.
Chris McKhann is an analyst and writer for OptionMonster.