The bulls are sticking with the banks.
optionMONSTER's Heat Seeker tracking system detected the purchase
of more than 40,000 April 25 calls in the SPDR S&P 500 Bank
fund against open interest of just 133 contracts. All the large
blocks priced for $0.40 or $0.45.
The KBE fell 0.37 percent to $24.31 in morning trading and is up 25
percent in the last three months. The exchange-traded fund has been
rallying as investors return to the financial sector. (See our
of U.S. lenders for more on how conditions have improved in the
The fund offers exposure to a wide range of banks including
Popular, Regions Financial, and SunTrust. Its gains are roughly
double that of the S&P 500 so far in 2012, but over the last
year it has significantly underperformed.
Today's activity is noteworthy because the investor may be using
to avoid missing further upside in the banks. If the trader were to
buy the fund's stock outright, for instance, he or she could be at
risk of a significant pullback. Using options limits that risk
while letting them save face with clients if KBE continues its
breakneck rally. (See our
More than 40,000 contracts have traded in the fund so far today,
about 8 times the average amount. Calls outnumber puts by more than
800 to 1.
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