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Bank Rally Brings XLF Bulls to the Table

One XLF trader is rolling a bullish position to the January series

Dec 4, 2017 at 11:52 AM
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As bank stocks rally on the Senate's tax bill news, the Financial Select Sector SPDR Fund (XLF) is assailing new heights. The exchange-traded fund (ETF) is fresh off a 10-year high of $28.20, and was last seen 1.9% higher at $28.09. What's more, XLF call options are flying off the shelves at a rapid-fire rate.

XLF calls are changing hands at six times the average intraday pace, with nearly 270,000 exchanged so far -- that's compared to just 36,000 puts. Call volume is now pacing for an annual high on the fund, and at current levels, it would mark XLF's lowest daily put/call ratio -- 0.14 -- in at least a year.

Earlier today, it appears one trader upped the bullish ante on XLF, selling to close 20,000 now in-the-money weekly 12/29 27-strike calls in order to buy 20,000 January 28 calls, per Trade-Alert. If so, the trader rolled a bullish position up and out a strike, with expectations for the ETF to extend its journey north of $28 through January options expiration.

Of course, the January calls also encompass the Fed's December meeting, wherein the central bank is widely expected to lift interest rates -- another boon for bank stocks. Considering expectations for a December rate hike have been mounting, it's no surprise to find that today's affinity for XLF calls merely echoes the recent trend in the options pits.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly four XLF calls for every put in the past two weeks. The resulting 10-day call/put volume ratio of 3.97 is higher than 94% of all other readings from the past year, pointing to a much healthier-than-usual appetite for bullish bets over bearish lately.


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