Unusual Options Activity In SPDR ETF, XLE
Oil prices have climbed about 45% since the end of October and recent hit a 11 month high due to a number of Covid-19 vaccine hitting the market and renewed hope of the global economy rebounding. In addition, Saudi Arabia is planning to cut output by an extra 1 million barrels per day in February and March to curb oil inventories from building up. As a result, these events are causing investors to bid up oil prices.
The Energy Select Sector SPDR® Fund seeks to provide an effective representation of the energy sector of the S&P 500 Index. The top holdings include:
Many on Wall Street are calling for the energy sector to have a break out year in 2021. As you can see from the top holdings above, ExxonMobil and Chevron account for almost 45% of the XLE. These two companies bottomed in October and have continued to move higher. This is great news for the XLE overall.
Thus, I wasn’t surprised to see the Smart Money adding to the open interest by buying 35,000 Feb. call options at the $45 strike price and selling 35,000 Feb call options at the $48 strike price yesterday.
I considered jumping in with the Smart Money yesterday, but price is too close to the weekly supply at $45. Thus, I will be watching from the sidelines to see how this trade plays out.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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