By Chris McKhann
The big option action in exchange-traded funds today is in the materials sector.
The Materials Select Sector SPDR (XLB) continues to retreat from its second highest close of the year. It trades at $34.32, down 1.44 percent on the day. The ETF closed above $35 on Monday, its second-highest close of the last two years behind the April 26 peak.
The XLB's average option volume is 22,000 contracts a day, but a single print is larger than that today, driving the overall option volume to 37,500. Dominating this action is the November 34 put strike, with more than 31,000 against open interest of 20,310 contracts. The largest block of 22,679 was bought for $0.85 as the price has been pushed up from buying at $0.70.
This put buying isn't clearly tied to any action in XLB shares, so it could be an outright bearish bet expectating that a pullback will hit hard in this area. Or it could be protective buying on long shares against the possibility of that happening.
Disclosure: No position