Protection in place on regional-bank fund

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Regional-bank stocks have been on fire, but one investor still wants protection.

optionMONSTER's Depth Charge tracking system detected the purchase of 14,000 June 28 puts on the SPDR S&P Regional Banking exchange-traded fund for $1.25. An equal number of June 20 puts was sold at the same time for $0.10, but volume was below open interest.

This suggests that an existing position was rolled from the 20 strike to the 28 level. It gives the investor an additional $8 of downside protection at an incremental cost of just $1.15. He or she probably owns the fund or stocks that track it, and is using the options to guard against a pullback. (See our Education section)

KRE is up 1.47 percent to $28.69 in midday trading and has risen 7 percent in the last week. It's been surging as sentiment improves toward banking stocks, especially after this week's positive stress-test results.

The fund's largest holdings include Synovus Financial, Popular, and Regions Financial, none of which account for more than 3 percent of its total portfolio.

Overall option volume in KRE is 8 times greater than average so far today, with puts outnumbering calls by more than 200 to 1.



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.


This article appears in: Investing , Options

Referenced Stocks: KRE

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