Unusual Options Activity In iShares US Real Estate ETF

| September 30, 2015 | 0 Comments

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye last week…

iShares US Real Estate ETF $IYR is one of the most popular real estate ETFs out there.  It trades over 10 million shares per day on average.  For a good description of the fund, follow the link.

As of this writing, $IYR is trading at $71.67… down 4% for the year.  That’s 13% below the 52-week high and 7% from the 52-week low.

So what does unusual options activity in IYR tell us?

The real estate market in the US is in an interesting spot right now.  Typically an improving housing market goes hand in hand with an improving economy.  On the other hand, a rising interest rate environment can certainly slow housing purchases due to higher mortgage rates.

The most recent Fed meeting was a key point for real estate analysts.  When will rates go higher?  How does the economy look?  Considering the economy is in decent shape, according to the Fed, the fact the FOMC didn’t raise rates this time out can be viewed as a good thing for real estate investors.

Here’s the deal…

Last week, a trader bought a large block of IYR calls expiring in early October.  Keep in mind, a call option makes money when the underlying stock or ETF goes up.

Specifically, a trader purchased 20,000 IYR 74 calls expiring on October 2nd.  The total cash outlay for this trade is roughly $480,000 or $0.24 per option, which is the max loss for the trade.  The trade breaks even at $74.24.

Here’s the chart of $IYR:

iyr092215

IYR plunged through the 50-day moving average during the correction in late August.  The ETF has regained quite a bit of ground since then, but has yet to break through the 50-day resistance line.

This trade suggests the fund could make a run at the 50-day (and higher) in the next week.  IYR would need to climb about $2.50 in that span for the trade to break even.

Given the Fed has left rates at near zero and the economy looks reasonably healthy, the trader is betting on a possible surge in real estate.  This could be because buyers want one last shot at getting ultra-cheap mortgages.  Or, perhaps he or she just feels real estate stocks were oversold during the correction and are due for a rebound.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis
Options Trading Research

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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