An options trading idea from Stutland Equities.

Overview: Utilities Select Sector SPDR (NYSE: XLU)

The Utilities Select Sector index has a total of 34 domestic holdings with 75% of the names in large cap and 25% in mid cap. XLU pays a dividend with the last pay date of March 30 in the amount of $0.3025.

XLU has been range bound within the last 30 days, decreasing about 0.40% in stock price. However, option volume on June 6 saw 3500 XLU June 33 Calls traded for an average price of $0.40. For the year, the exchange-traded fund has increased as much as 4.0% since the beginning of the year hitting a 52-week high of $34.30.

An investor seeking to add solid utilities to his portfolio may consider this ETF.

Option Trade – XLU June Put Spread

With ETF trading at $33.20, an investor could sell XLU June33/34 Put Spread for a $0.76 credit. In this case, the investor sells the higher strike (June 34) for $1.23 and buys the lower strike (June 33) for $0.47.

Check the options chains for current prices.

The maximum profit for the spread is the $0.76 collected for the spread. The maximum loss potential is $1.00, or the difference in the strike prices — 34-33 = 1.

This spread has a breakeven price of $33.24, or the higher strike price of 34 – the $0.76 credit = $33.24.

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.\