The Key Technical Level XLF Options Traders Are Targeting

XLF is struggling to break out of the $24 region, and bearish options traders are betting on losses

Feb 17, 2017 at 1:57 PM
facebook X logo linkedin


As we mentioned in passing earlier, bank stocks have struggled during the week of Presidents Day. Based on a study by Schaeffer's Senior Quantitative Analyst Rocky White, 10 of the 25 worst performers during the last decade are in the financial sector. This is bad news for shares of the Financial Select Sector SPDR Fund (XLF), and options traders today are trying to cash in on potential near-term headwinds.

Let's start on the charts. The exchange-traded fund (ETF) is currently struggling to break out of the $24 neighborhood, which founder and CEO Bernie Schaeffer highlighted in a recent Chart of the Week. Specifically, he noted a number of factors pointing to $24 as the key level at the moment: 

  • $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
Not surprisingly, the soon-to-be front-month March 24 call is home to the second biggest accumulation of open interest, across all options series. This could also contribute to near-term resistance for the financial shares, as the hedges related to the positions begin to unwind.

Today, though, it's the March 24 put that's in the lead, with over 75,400 contracts on the tape -- roughly five times more than the second most active strike. Already, three trades exceeding 10,000 contracts have transpired. Looking more closely, it's possible these put options are being newly purchased. Assuming that is the case, the traders anticipate XLF will breach the $24 level by the close on Friday, March 17, when the series expires.

Today, as noted, the Financial Select Sector SPDR Fund (XLF) is running into congestion above that key area. At last check, the shares were down 0.3% at $24.39. That said, there's no denying the strength of financial stocks since the U.S. presidential election, with the so-called "Trump rally" carrying the shares to a 22% gain. What happens next is anyone's guess, though, especially since XLF could be impacted by a Fed rate hike and/or details on President Trump's tax plan.

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