iShares Dow Jones U.S. Real Estate Index ( IYR - news - people ): The real estate exchange-traded fund has edged 2.5% lower Thursday to $42.44. Bearish plays in the November contract consisted of a 1,000 contract risk reversal wherein a trader sold 1,000 calls for $1.80 each at the November 45 strike in order to help finance the purchase of 1,000 in-the-money puts at the same strike for $4.60 apiece. The net cost of the reversal trade amounts to $2.80 and yields profits to the downside beneath the break-even share price of $42.20 for the IYR.  Further along, in the December contract, it appears one investor established a sold strangle in the expectation of lower volatility by expiration. The transaction involved the sale of 10,000 puts at the December 35 strike for $1.15 each, as well as the sale of 10,000 calls at the higher December 47 strike for $1.60 per contract. The gross premium enjoyed on the strangle amounts to $2.75. The investor retains the full premium received as long as shares of the IYR remain strangled within the confines of the strike prices through expiration. The short option positions leave the trader vulnerable to losses in the event that shares swing outside the break-even point to the upside at $49.75, or beneath the break-even price to the downside at $32.25.  Loading up on put options after the Fed announcement Sept. 23 paid off big-time. What about buying BIDU Jan 2010 calls at the $425 strike? Click here for all currently recommended trades in Bernie Schaeffer's Option Advisor.  Macy's ( M - news - people ): Put activity on the second-largest department store chain drove Macy's ticker symbol onto our market scanner Thursday morning amid a more than 2% decline in shares to $18.02. Earlier this week the stock rallied to its highest price in a year after a Citigroup analyst upgrade on expectations for revenue growth in 2010. One investor appears near-term bearish on the stock given the protective put positioning he has employed Thursday.  The trader partially financed the purchase of 5,000 puts at the nearly in-the-money October 18 strike for 82 cents premium apiece by selling short 5,000 puts at the lower November 16 strike for 70 cents each. The net cost of the transaction amounts to 12 cents per contract. The investor is likely long shares of the underlying stock. Thus, the put positions initiated Thursday provide downside protection in the event that shares slip beneath the break-even point to the downside at $17.88 by expiration in October. The short put position in the November contract will not be problematic for the trader unless shares take a big hit. By maintaining the short position, the investor bears the risk of having shares of the underlying put to him at $16 if the stock slips 11% lower to breach the $16-level by expiration in November.  Vale SA ( VALE - news - people ): Shares of the world's largest iron ore miner fell nearly 3% during the trading session to $22.39, despite the fact that Goldman Sachs raised its 2010 profit estimates for the firm Thursday. Nearer-term bearish bets by option traders were evident in the November contract through meager sales of calls and paltry put purchases. The real action occurred in the December contract where one bullish investor made his mark. Expecting shares to rebound by expiration at the end of 2009, the trader purchased 4,000 calls at the December 24 strike for a premium of $1.21 each, and simultaneously shed 12,000 calls at the higher December 27 strike for 43 cents per contract. The ratio call spread results in a net credit of 8 pennies. Additional profits are available in the event that shares of VALE rally 7% from the current price to breach the break-even point at $24 by expiration. Maximum potential profits of $3.08 per contract will be realized if shares surge about 21% higher to $27.  On Sept. 17, Larry McMillan issued buy signals for BIDU, DRYS, MSFT, POT and VALE. Are they still valid? Are speculative call options a good idea? Click here for daily trading advice in Option Strategist.  Freeport-McMoRan Copper & Gold ( FCX - news - people ): The more than 3.5% decline in shares of the metals and mining company to $68.50 Thursday did not deter the long-term bullish stance taken by one investor observed populating the May contract. The investor appears to have established a risk reversal by shedding 2,000 puts for $9.30 each at the May 65 strike to purchase 2,000 calls at the May 75 strike for $8.80 apiece. The transaction results in a net credit of 50 cents per contract for the trader, which he will retain in full as long as shares of FCX remain higher than $65 through expiration. Additional profits will begin to accumulate if the stock increases 9% from the current price to $75 over the next eight months. FCX has traded beneath $75 since Sept. 4, 2008, but shares came within $1.57 of the $75-level when the stock reached its current 52-week high of $73.43 just 2 days ago on Sept. 22, 2009.  Barrick Gold ( ABX - news - people ): Bullish traders purchased call options in the November contract on ABX Thursday, perhaps after the firm's target price was raised to $50 from $49 at Scotia Capital, and increased to $52 from $47 at RBC Capital Markets. Shares are currently off approximately 0.5% to $36.31. Traders scooped up 5,000 calls at the November 37 strike for an average premium of $2.70 per contract. Investors coveting these options are hoping shares of ABX rally at least 9% from the current price to the break-even point at $39.70 by expiration in November. We note that shares of Barrick Gold breached $40 this month on Sept. 4, 2009.  Citigroup ( C - news - people ): Trading in Citi options was once again heavy and characterized by greater bullish wagers as opposed to bearish ones. Its shares are down a little at $4.50. In the January contract one trader placed an intriguing trade. Some 10,000 puts appear to have been bought at the 4.0 strike at 42 cents, while the 6.0 calls appear to be sold at 25 cents Thursday. This could be a trader getting long Citi shares and buying downside protection at the same time--don't forget, they'd only reach the strike price by rallying 33%. Yet he could be simply bearish and looking for calls to decay and puts to appreciate on any fresh decline in the underlying. Option implied volatility continues to run at 294%.  Andrew Wilkinson is senior market analyst at Greenwich, Conn.-based Interactive Brokers. Reach him via e-mail: ibanalyst@interactivebrokers.com.
Weaker housing numbers bring out bearish options players taking aim at a real estate ETF. Others make bullish bets on gold and copper.