Huge trade tries to time the financials
David Russell | [email protected]
Our tracking systems detected the purchase of 35,000 December Quarterly 16 calls on the Select Sector Financial SPDR Fund for $0.16. An equal number of Weekly 16 calls expiring next Friday, Dec. 7, were sold at the same time for $0.06. Volume exceeded open interest in each strikes, indicating that a new position was implemented.
The trader now stands to make money if the XLF stays below $16 through the end of next week and then rallies in the following three weeks. If it goes above $16 too soon or stays below that level through year-end, the initial investment of $0.10 will be lost. (See our Education section for more on the strategy, known as a calendar spread.)
The XLF rose 0.51 percent to $15.78 yesterday. The fund sporadically traded above $16 in September and October but then fell along with the rest of the market. It bounced at a key $15 support level in mid-November and has been holding its ground since.
The fund holds stakes in a large number of major financials, including Wells Fargo, JP Morgan, and Berkshire Hathaway.
Calls outnumbered puts by roughly 2 to 1 yesterday, which reflects the bullish sentiment.