Puts Pick Up on Retail ETF with Black Friday Nearing

The front-month December series is home to heavy open interest on XRT

by Josh Selway

Published on Nov 25, 2019 at 2:50 PM

Retail earnings have been a point of focus in recent weeks, so we were taking a look at the sector's primary exchange-traded fund (ETF), SPDR S&P Retail ETF (XRT). As far as options data is concerned, traders have started to take a more put-skewed approach with more earnings due out this week from the sector, and of course the holiday shopping season picking up steam.

To be more specific, there's been a sharp increase in the front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR), an indicator that looks at near-the-money open interest in the front-month options series. Since the start of this month, this number has been rising, aside from a brief dip around November expiration, and has gone from 0.49 to 2.33 -- showing near-the-money puts now double calls in the December series. The most open interest is at the December 43 put (the most popular strike overall), followed by the 39, 40, and 42 puts.

To be fair, however, this actually puts the front-month gamma-weighted SOIR at more normal levels from a historical perspective, and it was actually the call-heavy reading coming into the month that was more unusual. Still, there's been notable put activity outside the front-month series, with one trader in particular buying to open 2,000 11/29 43.50-strike puts last Monday, betting on a pullback below $43.50 by the end of this week.

Anyone betting bearishly on XRT should take note of the 200-day moving average, which has twice served as strong support in recent weeks. At last check, the retail ETF was up 1.6% at $44.57.

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