The Bank ETF Trying to Extend its Fed Week Win Streak

Bank stocks have been outperforming in recent weeks, as the September Fed meeting has increased interest in the group, especially after signaling plans for a December rate hike. As such, we've been watching the SPDR S&P Bank ETF (KBE), which is on a four-day win streak -- though the regional bank exchange-traded fund (ETF) is 0.2% lower today at $43.34. And while its chart still looks promising -- KBE is now on pace for a fourth straight close above its 80-day moving average -- it looks like one options trader yesterday bet on a quick retreat from the fund. 

Specifically, KBE put volume closed yesterday at three times the intraday norm, thanks to a big trade at the October 42 put. One trader seemingly bought to open 2,000 of the contracts for 46 cents each, meaning they spent $92,000 to bet on the ETF retreating back below $42 by the close on Friday, Oct. 20, when the series expires. 

Today, calls are trading at 1.6 times the expected pace. The most popular contract is the December 44 call, followed by the January 2018 45-, 46-, and 47-strike calls. It's not clear if traders are buying or selling at these strikes, however. 

Call buying has remained the dominant options trading strategy, though, with the 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) coming in at 18.66. But despite the recent Fed meeting, there's been almost no interest in KBE options, based on the fact its total open interest of 64,432 ranks in just the 30th annual percentile. 

That's somewhat surprising, since it seems to be a great time to buy short-term options right now. the ETF has a 30-day at-the-money implied volatility of 17.4%, ranking below 92% of readings from the past year.