Tech Fund Attracts Big Upside Bet

By Pete Najarian of OptionMonster
 
Bullish option traders are targeting the SPDR Technology Fund (XLK), which includes big names such as Apple (AAPL), Microsoft (MSFT) and Google (GOOG).
 
OptionMonster's tracking systems detected heavy buying in the June 38 calls for 20 cents on Wednesday, where volume of more than 50,000 was twice the strike's previous open interest. The main chunk was the largest block of options in the entire market all day, weighing in at a whopping 42,300 contracts.
 
Long calls lock in the price where the stock can be purchased, offering a lot more bang for the buck on a percentage basis if it rallies because they cost much less than buying shares up front. That also limits the amount of capital at risk, but these contracts can expire worthless if the stock stalls or pulls back.
 
The exchange-traded fund has been churning in a range since December but Wednesday rose 0.98% to $36.08. It hasn't seen $38 since early 2001, so those call buyers are definitely looking for the bulls to run again in the space.
 
More than 61,000 options traded overall in the fund, more than triple its average daily turnover of 18,000 for the last month. Calls outpaced puts by 58,000 to just 3,375.
 
Najarian owns XLK calls.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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