Breaking News
Investing Pro 0
💎 Access the Market Tools Trusted by Thousands of Investors Get Started

Taking What XLF Gives (Or Not)

By Jay KaeppelETFsOct 31, 2018 01:11PM ET
Taking What XLF Gives (Or Not)
By Jay Kaeppel   |  Oct 31, 2018 01:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

In this article on 10/30 I highlighted a hypothetical example trade in Financial Select Sector SPDR (NYSE:XLF), based on:

*An expected bounce in the overall market

*Extremely negative sentiment for XLF

*A positive divergence between XLF price action and the 3-day RSI

Guess what, folks…sometimes this stuff actually works!

The example trade was intended as nothing more than a short-term speculation hoping for a “pop” in XLF. Figure 1 displays the current status of the trade (assuming the trader was willing to risk $500 on the trade) as I type.

XLF Dec 26 Call Option Trade
XLF Dec 26 Call Option Trade

Figure 1 – XLF Dec 26 call option trade Courtesy

The good news is that XLF moved higher yesterday and is up more than 2% today. The trade has already generated more than a 60% profit. The bad news is that everything could change very quickly if XLF turns back down.

So, a trader in this example has 3 basic choices:

1. Let it ride

2. Take a profit

3. Adjust the trade

Here is one thing you need to know and accept if you are going to trade options: There is no “correct” answer among the choices listed above. Each trader must make decisions about how they want to proceed based on their own individual outlook and priorities.

#1. Let it Ride: If you think things are looking good and you want to try riding it further then no action is necessary. Now would be a good time, however, to decide what exactly would cause you to act going forward, i.e., if XLF RSI hits 75, or if XLF price drops back below $26, etc., etc. (here again, there are no “correct” answers).

#2. Take a Profit: As this was intended as a speculative short-term trade hoping for a “pop”, there is nothing wrong with saying “Mission Accomplished” and cashing out. Just remember to avoid the human nature tendency to kick yourself if XLF keeps moving higher. You accomplished your goal – move on without emotion.

#3. Adjust the Trade: There are countless possibilities and again, no “correct” choice. But for the sake of example let me highlight one possibility. This one involves:

*Selling 4 Dec 26 calls @ $1.12

*Selling 2 Dec 27 calls @ $0.59

This leaves a trader with 3 long Dec 26 calls and 2 short Dec 27 calls. The sum total of all of this appears in Figure 2.

Adjusted XLF Position
Adjusted XLF Position

Figure 2 – Adjusted XLF position Courtesy

This position has locked in a small profit and still enjoys the potential for unlimited profits if XLF continues to advance (albeit much less profit potential than with the original 7-lot position).


There are a lot of ways to “play the game”. The key is to:

*Spot opportunity

*Exploit opportunity (without assuming more risk than you can handle)

Taking What XLF Gives (Or Not)

Related Articles

Taking What XLF Gives (Or Not)

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email