Mark Sebastian's Options Insight: How To Play The Consumer Staples ETF

Speaking on Bloomberg Markets, Mark Sebastian of Option Pit shared with the viewers his trading idea for Consumer Staples Select Sect. SPDR (ETF) XLP.

Sebastian thinks interest rates policy has changed and he believes interest rates are going to stay stable and low. In such an environment, dividend plays could be interesting for investors and Sebastian sees Consumer Staples Select Sect. SPDR (ETF) as a good candidate for a long position because of its nice dividend yield.

He wants to take a long position by selling the August 53 puts for $1.13. The trade starts to lose money at $51.87 or 2.72 percent lower from the current price. If the ETF trades higher at the August expiration, he is going to collect the premium, which is the maximal profit for the trade, but if Consumer Staples Select Sect. SPDR (ETF) drops below $53 at the August expiration, he is going to have to buy the stock.