Financial Select Sector SPDR Options (XLF): Unusual Trading Activity

| April 9, 2012 | 0 Comments

XLF OptionsOptions in the Financial Select Sector SPDR ETF (XLF) are already trading enormous volume this morning.  Our tracking system just keeps flashing with put buyers.  Option traders are buying multiple strikes across multiple months.

What’s more, they’re paying a lot of money for the premiums.

The largest volume is in the June contracts, which have already traded over 25,000 contracts this morning.

The XLF has not been able to trade above $16 a share in over a year.  Now, with a possible market correction staring us in the face, option traders are coming in by the bus loads.

In early trading, the XLF is down 1.8% to $15.25 a share.

One of the top option trades today in the XLF is concentrated on the June $13 strike puts.

During the first 3 minutes of trading, one trader came in and purchased 10,000 contracts of this strike at a price of $.015 a piece.

This is a true speculative play with gigantic profit potential.  I mean, the XLF hasn’t seen this level since December 2011.  So, if it was to get there, this trade would be like winning the lottery.

However, there’s no doubt this option trader doesn’t think it’s out of the realm of possibility that with a nice size market correction, these options will have little problem increasing in value.

This guy sure is negative on the banks right now.

You see, since the XLF holds all of the financial-related names from the S&P, the big put purchase is an obvious bet against the big name banks.

As we’ve heard many times before, there can’t be a sustained market rally without bank participation.

And it’s clear this trader certainly agrees with that statement.

Personally, I hope he’s wrong.

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.