One investor is bracing for a pullback in bank stocks now that
they are back to a key level from 2011.
optionMONSTER's Depth Charge tracking program detected the purchase
of 4,972 February 25 puts on the SPDR S&P Bank Fund for $0.75
yesterday, while an equal number of February 25 calls was sold at
the same time for $0.43. There was barely any open interest at
either strike before the trade occurred, so this is new activity.
The investor is probably
protecting a long position
in the KBE or stocks correlated to its index. He or she collected a
credit of $0.32 and has now locked in a selling price of $25.32. If
it wasn't done against a long position the trader has a highly
leveraged short position, with the danger of infinite losses if the
stock rises. (See our
The KBE fell 0.48 percent to $24.85 yesterday but has climbed 13
percent in the last six months. It's outperformed the broader
market in that period as investors returned to the beaten-down
The exchange-traded fund's current price around $25, however, has
been resistance since May 2011. That could be leading some chart
watchers to expect that it will struggle to keep climbing or drop.
The bearish trade pushed total option volume in KBE to 5 times
greater than average in yesterday's session, according to the Depth
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.