Unusual Options Activity Trade of the Day 9.9.2013

The Technology Select SPDR (XLK) is up over 6.5 percent YTD in 2013, with shares thus far proving unable to breakthrough the $32.50 level.  XLK shares have consistently made new highs since breaking through $28 in February of 2012.  Top holdings of the ETF include Apple (12.43%), Microsoft (MSFT, 8.68%), Google (GOOG, 7.91%, IBM (IBM, 6.66%), and AT&T (T 6.37%).  Verizon (VZ), Cisco (CSCO), Oracle (ORCL), Qualcomm (QCOM), and Intel (INTC) round out the ETF’s top 10 holdings, which comprise 62 percent of its assets.

Traditionally, the fourth quarter is one the strongest for tech, as enterprise customers and IT executives rush to spend discretionary budget and capitalize on year-end discounting.  This is important, as IT departments usually will lose whatever budget is left unused in the next fiscal year.  At the same time, companies whose fiscal calendars coincide with the calendar year will discount more aggressively than usual to add last minute sales to the book.

Today, we saw a trader buy 25,000 XLK Sep (27th) Weekly 33 Calls for $0.05 – $0.06.  This trader will make money should XLK shares trade anywhere above $33.06.

Our Trade:
Buy the XLK Sep (27th) Weekly 33 Calls for $0.07
Risk: $7 per 1 Lot
Reward: Theoretically Unlimited
Break-even: $33.07

Greeks of This Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long