NEW YORK -- Option traders are sticking with consumer stocks as the job market improves.
OptionMonster's Heat Seeker system detected heavy call buying Friday in the SPDR Consumer Discretionary Fund (XLY) - Get Report, the strongest of S&P's major sector funds in the last three months. The largest block, more than 54,000 contracts, hit about an hour after the opening bell on Friday for 65 cents. Volume dwarfed previous open interest of just 10 options, showing that new money was put to work.
Those long calls lock in the price where the fund can be purchased through early next year. They will let the investor leverage a rally at limited cost, risking much less capital than would be needed to own shares.
The XLY fell 1.19% to $75.41 on Friday. The entire market was under pressure after strong employment numbers caused investors to worry about higher interest rates. But that same labor trend has been helping consumer stocks, driving profits at retailers, hoteliers, and media companies.
Total option volume was five times greater than average in the session, with calls outnumbering puts by 7 to 1. The exchange-traded fund, whose largest holdings are Walt Disney, Comcast, and Home Depot, also saw bullish option activity on Feb. 25.
-- Written by David Russell of
Russell has no positions in XLY.