Tech Traders Seek Put Options as XLK Eyes Ninth Straight Gain

Technology Select Sector SPDR ETF (XLK) could be staring down several levels of notable resistance, with traders looking to hedge their bets with XLK puts

Feb 15, 2017 at 12:29 PM
facebook X logo linkedin

With the recent outperformance among tech stocks -- including Apple Inc.'s (NASDAQ:AAPL) record-breaking pop today -- the Technology Select Sector SPDR ETF (XLK) is on track for its ninth straight win, with the shares tacking on more than 7% already in 2017. However, in spite of its technical strength, XLK could be staring down several layers of heavy resistance, and it looks like some traders are hedging their bets with put options.

XLK Looking Up At Resistance

So far today, XLK is up 0.1% at $51.75, and earlier notched a new 16-year high of $51.83. However, XLK could be closing in on a number of potential resistance levels. Immediately overhead, the $52 mark is roughly four times XLK's 2009 lows, while the farther-overhead $56 level was home to notable resistance during the early 2000s dot-com bubble. If XLK manages to break through both of these key technical marks, it could hit an additional barrier at the $57 mark, which is roughly five times XLK's 2002 lows.


Options Players Hammer XLK Puts

In the options pits, traders have been more put-heavy than usual. XLK's put open interest is in the 82nd percentile of its annual range, with 229,551 contracts on the books. Meanwhile, call open interest is currently at just 91,162 contracts, in the bottom 21% of its annual range. In addition, XLK's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 8.63, in the 91st percentile of its annual range, pointing to a healthier-than-usual appetite for long puts over calls in the past two weeks -- a sharp reversal from the trend seen in late January.

Drilling down, the September 45 put is easily the most added option over the past 10 days, with 71,236 contracts opened during the last two weeks -- about four times more than the next most active option, according to Trade-Alert -- and with notable buy-to-open activity. The September 45 put is now XLK's top open interest position. While it's possible some of this open interest comes from skeptics betting on a sharp pullback, it's also likely that some bullish tech sector traders are seeking an options hedge, in case of a "bubble burst." After all, XLK's 14-day Relative Strength Index (RSI) is in overbought territory, at 75.

Don't miss Schaeffer's free weekly stock market forecast. Sign up now for Monday Morning Outlook.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI