This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bears Circle Financials

TheStreet Premium Services

A complimentary preview
of Options-Profits Previews

SPDR Financial Fund (XLF) continues to attract a lot of put buying despite relative strength in the group. The exchange-traded fund is one of nine SPDR sector funds that collectively hold all of the names from the S&P 500. XLF was down $0.12 to $19.45 Friday, but has added 18.7% in the first six months of the year. In the options market, much of the recent activity in XLF has been focused on July and August 19 put options.

In contrast to the first quarter, when defensive names like utilities, healthcare and consumer staples names led the S&P 500 to a 10% gain, the second quarter saw mixed action across the nine key economic sectors and the S&P 500 rose just 2.6%. Utilities, energy and basic materials names saw relative weakness. Healthcare and cyclicals were areas of strength. However, financials were the best performing sector after the XLF gained 7.5%.



While financials have been a bright spot over the past few months, the order flow in the options market seems to reflect a cautious or bearish short-term view on the sector. Friday, for example, 94,400 July 19 puts traded on XLF, including a morning buyer of 50,000 contracts for $0.24 per contract. It was an opening position.
XLF Daily Contract Volume
Source: Trade Alert


The bearish trading is part of an ongoing theme seen during the past month. Players have not only been buying July 19 puts, where open interest is now more than 290,000 contracts, but also in August 19 puts. Open interest in XLF August 19s is now 445K and one of the larget blocks of OI among all US-listed options today.

The huge open interest that is building in 19 puts on XLF in recent weeks is unusual given the relative strength in the sector over the past few months. It's not clear if some "smart money" players are concerned about a potential catalyst that will send shares of the major banks or brokers lower, or whether the flow is merely hedging activity after the recent increase in market volatility since early-May. For whatever reason, the there's a lot of put buying in XLF and, until it subsides, I remain cautious on the sector as well.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.

EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.



Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
Top Rated Stocks Top Rated Funds Top Rated ETFs