Big Printin’ – XLF Bank Heist

by Dan January 27, 2017 10:10 pm • Big Printin'

The largest trade in the options market today, in contract terms was in the XLF, the S&P Financial Select etf. When the etf was trading $23.63 at 3:20pm a trader bought to open 152,000 of the June 22 / 19 put spreads for 35 cents., or $5.25 million in premium. This trade breaks-even at $21.65, down 8.4% from the trading level on June expiration, and offers a profit potential of up to $2.65 between $21.65 and $19, with the max gain at $19 or below, or $40.28 million in premium.

Prior to the bulk of Q4 bank earnings earlier in the month, I had some thoughts on the prospects for higher highs in the coming months on CNBC’s Fast Money:

And we detailed a strategy to hedge against a pullback in the sector after such dramatic gains since the election (MorningWord 1/9/16: Bank Heist – XLF). With Q4 earnings having come and gone, the XLF remains in the consolidation it has been in since early December between $23 and $24, but the choice of strikes of the June put spread purchased earlier is fairly interesting when you considered the air-pocket from the October lows to the November highs:

XLF 1yr chart from Bloomberg
XLF 1yr chart from Bloomberg