A strategy idea for options trading investors.

TRADE COMMENTARY: Due to the high level of instability and volatility in the market, we are being extremely defensive and hiding among the safety of the utility sector. We recommend buying calls as opposed to going long stock because it allows us to limit our capital outlay, reduce risk, and allow for upside gains. By buying an in-the- money-call we are betting that the Utilities SPDR (NYSE: XLU) stays here or moves higher. This is a defensive play because the predictability of utilities is sought during times of economic uncertainty. It is important during times like this to have limited risk and to know where your exposure is, and that is exactly what this position allows us to do.

OPTION TRADE — Utilities SPDR (NYSE: XLU)

DATE:                         Monday, June 27, 2011

STOCK/INDEX:         XLU

STOCK PRICE:          32.80

OPTION PLAY:          Long Call

BUY/STRIKE/MONTH/PRICE:                     1 August 32 Call for $1.35

NET COST:                 $1.35 x 100 = $135

BREAKEVEN:            32 + 1.35 = 33.35 i.e.

Strike + Premium Paid = 33.35

MAX PROFIT:            Unlimited

MAX LOSS:                $135 (Net Cost)

Stutland Equities is a premier futures and options trading company on the Chicago Board Options Exchange. Founded in 2005 and headquartered in Chicago, Stutland Equities specializes in volatility arbitrage across multiple asset classes.