Friday, August 20, 2010

XLY, XLI - Massive Bet on Market Spasm in Key Industries

XLI (Industrials) is trading $29.07, with IV30™ up 4.5%. XLY (Consumer Discretionary) is trading $30.73 with IV30™ up 1.0%. The LIVEVOL™ Pro Summaries are below.

Cathy Clay, floor trader extraordinaire on the NYSE ARCA brought this order flow to my attention.

Yesterday two huge trades crossed the tape in the Jan '11 19 puts; same lines, same month for both. The top trades from yesterday are included below (click to enlarge). First XLI, then XLY below it.

The Options Tab for both are included (click to enlarge). Note the OI in those lines (first XLI, then XLY).

Both lines are 100k+ long those puts. These are massive bets on a downturn and a vol jump.

The XLY line is long $190,000/vol in vega. The XLI line is long $240,000/vol in vega. Taken together, these bets are long $430,000/vol in vega. That's almost half a million for each point vol moves in those puts.

The 52 wk ranges on these two are:
XLY [$25.40, $36.13]
XLI [$24.29, $33.46]

Make no mistake, this is a bet on a spasm in the financial markets before year end. Note also the EFA (Europe, Australia and Far East) order flow; big put buyers and spreaders. Jeff Kearns of Bloomberg brought this to my attention and will have a detailed article about EFA coming out soon.

At the end of Nov (ish) in 2008:
XLY dipped into the $16 area; XLI into the $19 area. Hmmm.

This is trade analysis, not a recommendation.

Legal Stuff:


  1. can we get some history on where they wore during the meltdown
    and see why someone would be expecting the worst by year end

  2. Great question Yossi: XLY dipped into the $16 area; XLI into the $19 area. This happened at the end of Nov (ish).