Calls Pop as Agriculture Fund Gains

| About: PowerShares DB (DBA)

By Chris McKhann

Call action is lighting up our screens as the DBA agriculture exchange-traded fund climbs to multi-year highs.

The PowerShares DB Agriculture Fund is up 1 percent to trade at $31.05 after jumping as high as $31.65 earlier in the session. This is the highest level since September 2008 as shares have climbed almost 50 percent off the June lows.

The 35,000 contracts that have already traded today are more than three times the average full-session volume for the ETF, and calls outpace puts by 30 to 1. The majority of the volume is in one call spread, as a trader bought 10,000 December 33 calls for $0.40 and sold 10,000 December 31 calls for $1.

On the surface this looks like a credit spread with the intention of profiting if the DBA is below $31 at expiration, but the open interest complicates the analysis. Because the volume traded at the $33 strike is more than open interest, we know that is a new opening position; but the open interest at the $31 strike was 11,394.

In the end it appears that this is still a bullish trade, one that takes profits off the table by selling a previous long call position at the $31 strike and rolling it up to the $33 strike. By doing this, the investor takes $0.60 off the table and still has exposure if the DBA continues to rally.

Disclosure: No position