XLF Options Volume Explodes After Yellen

Financial Select Sector SPDR Fund (XLF) options are flying off the shelves amid hawkish Fed talk

Feb 14, 2017 at 1:27 PM
facebook X logo linkedin

Financial stocks are higher this afternoon, as traders cheer hawkish commentary from key Fed officials, including Fed Chair Janet Yellen. As such, the Financial Select Sector SPDR Fund (XLF) is flirting with territory not charted since 2008, and options on the exchange-traded fund (ETF) are flying off the shelves as speculators place big short-term bets.

Big Options Spreads on XLF

XLF has seen roughly 151,000 calls and 159,000 puts change hands so far -- two times the average intraday clip. According to Trade-Alert, one trader likely bought to open 40,000 April 23 puts, and reduced the cost of entry -- and profit potential -- by simultaneously selling to open the same amount of April 21 puts. Each bear put spread was established for $0.24, or $960,000 total ($0.24 x 40K contracts x 100 shares per contract).

If the trader is "vanilla," they hope to profit from a decline south of $22.76 (bought strike minus premium paid) for XLF by April options expiration. But considering the ETF has rocketed more than 9% higher in just three months, last seen at $24.24 -- and off a multi-year best of $24.34 -- the speculator may have initiated the spread as a broader hedge.

On the other side of the aisle, it looks like one trader is gambling on even higher highs for XLF by April options expiration -- which encompasses the Fed's highly anticipated March meeting. Specifically, it seems the trader rolled up 20,000 calls from the March 24 strike to the out-of-the-money April 25 strike. XLF hasn't traded atop $25 since late 2007.

$24 a Sticking Point for XLF?

What's more, the ETF is in the midst of congestion in the $24 range, as founder and CEO Bernie Schaeffer noted in a recent Chart of the Week. Not only is the March 24 call home to peak open interest across all options series -- which could translate into a options-related speed bump in the short term -- but consider the following historical price points:

  • $24.74 = 20% below June 2007 all-time high
  • $24.10 = February 2008 high
  • $23.85 = 5 times March 2009 low
  • $23.79 = 50% return from February 2016 low
  • $23.49 = XLF's 2007 close
  • $23.46 = XLF's 50-day moving average

XLF chart financial stocks

Against this backdrop, and with expectations for a March rate hike on the rise and Trump's highly anticipated tax plan on deck, it will be interesting to see how the shares of the Financial Select Sector SPDR Fund (XLF) -- as well as this pair of financial stocks testing their own key levels -- perform in the near term.

Stay in the loop with stocks on the move. Sign up now for Schaeffer's Midday Market Check.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI