Options Traders Pounce on Retail ETF During Sector Struggles

The retail sector is one of the biggest losers on Wall Street today

by Josh Selway

Published on Nov 20, 2018 at 12:34 PM

Outside of tech, almost no sector is feeling the brunt of the stock market sell-off more than retail stocks, headlined by Target's (TGT) post-earnings slide. As such, the SPDR S&P Retail ETF (XRT) is seeing increased attention, with the exchange-traded fund (ETF) last seen trading down 1.8% at $44.67, falling further below the formerly supportive 320-day moving average -- and options traders could be betting on more downside going forward.

xrt price today

Digging into today's options activity, more than 29,000 put options have traded, dwarfing the roughly 4,800 calls that have crossed, and already doubling the daily average. New positions are being opened at the December 44 put, with traders likely eyeing a move below $44 from the ETF in the coming weeks. The March 39 and January 2019 40-strike puts are also seeing notable volume.

Near-term options traders had been targeting puts before today, too. XRT's Schaeffer's put/call open interest ratio (SOIR) stands at 3.81, showing put open interest almost quadruples call open interest among contracts expiring within three months. What's more, this reading is in the 82nd annual percentile, confirming such a put-skew is uncommon.

Unsurprisingly, anyone interesting in speculating on the SPDR S&P Retail ETF will be dealing with elevated volatility expectations. This is based on the security's 30-day at-the-money implied volatility, which has jumped to 28.4% -- ranking in the 98th annual percentile.

It could be worth noting that XRT has actually struggled to live up to options' traders high volatility expectations during the past year. More specifically, its Schaeffer's Volatility Scorecard (SVS) is just 34 out of 100, showing options traders have regularly overpriced the ETF's ability to make large swings.

a schaeffer's exclusive


We're celebrating 38 years with this FREE insider report!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

What's Next for the American Wealth Gap
Porter Stansberry is predicting a major change in the American economic system.
RBS Stock Rises on New CEO Appointment
Alison Rose will be the first woman to serve as CEO to a major British lender
2 Energy Stocks Snap Back After Heavy Losses
Energy stocks CRC and MDR are rallying back from brutal selling earlier in the week
How the 2020 Election Will Affect the U.S. Economy
The 2020 election could see some major changes in the American economic system.