Today’s tickers: WFC, IYT, RYL, YHOO, XLE, MU, ADCT, KBH, DELL, NE & GPS

WFC - Wells Fargo & Co. – Shares of the financial holding company surrendered 1.5% today to stand at $27.88. One investor initiated a sold straddle on WFC in the April 2010 contract. The trader sold 10,000 calls at the April 32 strike for 1.59 apiece in conjunction with the sale of 10,000 now in-the-money puts at the same strike for 5.81 each. The gross premium on the transaction amounts to 7.40 per contract. The investor will retain the full premium if shares settle at $32.00 by expiration. The premium received acts as a buffer against losses in the event that shares swing in either direction away from the $32.00-level. However, the trader will accumulate losses if shares breach the upper breakeven price of $39.40, or if shares decline beneath the lower breakeven point at $24.60, by expiration in April.

IYT - iShares Dow Jones Transportation Average Index ETF – The exchange-traded fund, which measures the performance of the transportation sector of the U.S. equity market, appeared on our ‘hot by options volume’ market scanner this afternoon after one investor initiated a bearish put play. Shares of the fund moved 0.5% lower to $70.53 during the session. The trader established a put spread by purchasing 5,000 puts at the December 70 strike for 1.80 each, and by selling the same number of puts at the lower December 65 strike for 40 cents apiece. The net cost of the trade amounts to 1.40 per contract and provides downside protection beneath the breakeven price of $68.60 down to $65.00 through December’s expiration.

RYL - The Ryland Group, Inc. – Shares of homebuilder and mortgage-finance company, Ryland Group, declined nearly 4% this afternoon to stand at $18.86. Investors exchanging options on the stock today spread pessimistic sentiment through to expiration December. Traders sold 10,000 calls at the December 19 strike for an average premium of 1.10 apiece. The full 1.10 premium pocketed by investors is retained in full as long as shares of RYL remain below $19.00 through expiration day. Call-sellers do not seem to expect that shares of Ryland will recover before the start of 2010.

YHOO - Yahoo!, Inc. – We observed two different option strategies in play on Yahoo this afternoon. A large-volume sold strangle in the January 2011 contract suggests shares are likely to remain stagnant through expiration. The transaction involved the sale…

"One sector I’ve been watching closely for an attractive entry point is energy, and that point is here in the Energy Select Sector SPDR (NYSE: XLE)," says Doug Fabian in The ETF Trader.

"This fund’s components include companies from the following industries: oil, gas, energy equipment, and energy services.

"The fund will normally invest at least 95% of its total assets in common stocks that comprise the relevant Select Sector Index. 

"With XLE, you are getting the best-of-breed energy companies out there today. Companies such as Exxon Mobil, Chevron and Schlumberger are three of XLE’s top holdings.

"Technically, XLE is trading above both its short-term, 50-day moving average as well as its long-term, 200-day moving average. More importantly, after hitting a new 52-week high in mid-October, XLE now has pulled back just enough to where we can enter into the fund at an attractive price.

"Of course, we always must place a stop-loss order whenever we buy something, so along with your market order to buy XLE, I also want you to place a stop-loss order of $54.50. This price is approximately 7% below today’s closing value of XLE.

"You don’t want to be long in a volatile sector like energy without a safety net, so please make sure you have your protection firmly in place.

"This market just has too strong of a penchant for going higher and, as such, we are not going to try and buck the trend. Of course, if things change, so too will our position. But until then, go long in this market with XLE."