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

SPDR Financial Fund Volume Spike Explained

TheStreet Premium Services

A complimentary preview
of Options-Profits Previews

The SPDR Financial Fund (XLF) is one of nine sector funds that collectively hold all of the S&P 500 stocks. As the name suggests, XLF holds all of the financial-related names from the index. Shares have performed well in 2013 and, while down $0.12 to $20.30 Monday morning, are up 16.4% year-to-date. XLF briefly revisited its July 22nd 52-week highs of $20.87 Wednesday afternoon when it rallied to $20.83 on the heels of the Federal Reserve meeting. It has shed 2.5% since that time.

Some players in the options market seem concerned that financials might falter in the months ahead, as XLF saw a surge of put activity on Friday. Nearly 900,000 put options traded on the financial ETF. It was the most put activity in XLF in over a year, 11X the normal put volume, and compared to call volume of just 43,000 contracts.

XLF Daily Contract Volume
Source: Trade Alert


A large chunk of Friday's put activity was due to spread trading. In morning action, an investor sold 96,000 October 17/19 put spreads on XLF and sold 96,000 October 18/20 put spreads, collecting $0.18 net on the two October out-of-the-money spreads. At the same time, the same investor also bought 192,000 December 18/20 put spreads for $0.38. While the spreads in October options were closing, a new position was opened in December.

The huge spreads in XLF Friday probably adjusted a hedging strategy against a portfolio of financial names. With XLF revisiting its 52-week highs on Wednesday, the investor was probably rolling a protective put strategy out to December from October to buy more time. Nevertheless, since the December 18/20 put spread represents a whopping $390 million in notional value, it is unlikely that the position would be initiated unless the investor has very serious concerns about the short-term outlook for the banks, brokers, and other financial components of the XLF.

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.



Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

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
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV

Partners Compare Online Brokers

Top Rated Stocks Top Rated Funds Top Rated ETFs