Back on June 1st, I talked about a naked call strategy on XLY, the Consumer Discretionary ETF. To refresh, the ETF closed at 76.52 then. At the time, weekly June 5th 76.50 calls were sold for $0.47. Last Friday, the consumer discretionary ETF (XLY) closed at $76.52.
The OCC’s (Options Clearing Corporation) threshold for auto assignment is $0.01 in the money. XLY was $0.02 in the money when the option expired.
Hypothetically, the short call gets assigned, creating an effective short at $76.97.
Yesterday, XLY closed at $75.98, taking out its 50-day moving average. Daily momentum indicators still seem to want to go lower. Ditto with weekly conditions. The ETF is approaching trendline support going back to December last year (blue arrow in chart), which also approximates the lower Bollinger Band. So we will see what happens here.
Consumer Discretionary ETF (XLY) Chart
Intermediate-term, there is probably more downside ahead for this Consumer Discretionary ETF.
Retail sales for May will be reported this Thursday, and can influence how XLY trades, particularly that day. Of late, retail sales have lost momentum – down month-over-month in four of the last five months. Year-over-year, growth has been decelerating since last August – from growth of five percent to 0.9-percent increase in April.
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The author does not have a position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
