XLF Draws Bullish Options Trades

By Pete Najarian, co-founder of OptionMonster.

NEW YORK (TheStreet) -- The Financial Select Sector SPDR (XLF Quote) exchange-traded fund lit up the OptionMonster screens Monday with large upside activity ahead of major earnings reports this week.

The call buying in the ETF, which tracks the S&P 500's biggest financial names, may represent some optimistic positioning ahead of third-quarter results. The calendar is filled with key reports this week, including JPMorgan Chase (JPM Quote) Wednesday, Citigroup(C Quote) and Goldman Sachs (GS Quote) on Thursday, and Bank of America(BAC Quote) on Friday.

The ETF saw some huge positioning in the November 16 calls, in which more than 162,000 contracts traded in a strong buying pattern for 42 cents to 52 cents, according to OptionMonster's proprietary tracking systems. That was roughly six times the open interest at the strike, indicating newly opened positions, and dwarfed the average call volume of just 2,743 a day in the last month.

XLF closed Monday at $15.36, up less than 1%. The fund has struggled to stay above $15 and hasn't crossed $16 since Nov. 5, 2008.

The stock would need to rise at least 7% for the calls purchased Monday to turn a profit before the contracts expire on Nov. 20.