Puts Pop on This Banking ETF

Put volume is seven times greater than call volume today

by Patrick Martin

Published on May 14, 2020 at 2:46 PM

Two months ago, when we last checked in with Financial Select Sector SPDR Fund (XLF), the banking exchange-traded fund (ETF) was seeing a huge deep-pocketed bet in the options pits. Now, as XLF continues to languish and bank stocks like Wells Fargo (WFC) deal with dividend cut drama, it's worth revisiting the financial services ETF's options pits.

At last check, a whopping 514,000 XLF put options have crossed the tape -- six times the intraday average and seven times the number of calls traded. Leading the charge is the June 21 put, and there are also new positions being opened at the 20-strike in the same series.

This explosion in CYH's options pits -- an emphasis on puts -- is not unprecedented. For context, in the past 10 days, 193,487 puts have exchanged hands compared to 104,849 puts. Digging deeper, the June 21 put has also seen the largest increase in open interest in the last two weeks. 

Now certainly looks like an affordable time to buy XLF options, per the security's Schaeffer's Volatility Index (SVI) of 45%, which sits in the 24th percentile of all other readings from the past year. This implies that near-term option traders are pricing in relatively low volatility expectations.

On the charts, XLF has had a horrendous year, sporting a 32% year-to-date deficit and a 12-month haircut of 22%. Recent pressure has emerged at the 50-day moving average, a trendline that contained a late-April push to the $24 level. 

Daily Chart XLF


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