By Doris Frankel
CHICAGO, Oct 12 (Reuters) - With earnings season heating up, many option players are betting on a possible lift in the financial sector within the next few weeks.
Shares of the Financial Select Sector SPDR, an exchange-traded fund that holds all of the financial-related companies from the Standard & Poor's 500 index, was up 12 cents to $15.36 at the close.
The rise in the ETF was accompanied by a flurry of option activity, notably in the fund's calls allowing investors to buy its shares at a fixed price within a specified time period between now and mid-November.
In all, about 267,000 calls and 200,000 puts changed hands in the ETF, 1.7 times the normal daily combined turnover, according to option analytics firm Trade Alert.
Many investors gravitated to the November $16 call strikes, where massive transactions suggested more gains in the fund's price by expiration.
'The call buying we are seeing in the November options could be tied to bullish bets that the financial sector results will be better-than-expected,' said Jon Najarian, a co-founder of Web information site optionMonster.com.
At an average premium of 48 cents, investors holding the calls would turn a profit if the fund rises above the $16.48 break-even price by mid-November. The last time the fund crossed $16 was on Nov. 5, 2008.
'This would easily be achievable with the current head of steam the market seems to have,' said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.
The November $16 call strike traded 162,087 times, well beyond the number of existing positions held by investors of 27,206 contracts, indicating new positions were initiated, Reuters data show.
The bullish sentiment also spread to the November $17 call strike, which attracted buying interest and had volume close to 20,000 contracts. Traders earlier paid an average of 19 cents to take ownership of 12,600 options, Wilkinson said.
There was also action in the front-month October $15 and $16 call strikes, contracts which expire on Friday, said WhatsTrading.com option strategist Frederic Ruffy.
The fund's components includes JPMorgan Chase & Co, Citigroup Inc, Goldman Sachs and Bank of America , companies that are due to report quarterly results this week.
Higher capital markets revenues may pull the largest U.S. banks' third-quarter earnings into the black, but many regional banks will struggle to turn a profit as loan losses rise further.
(Reporting by Doris Frankel; Editing by Diane Craft) Keywords: XLF CALLS/BULLS (doris.frankel@thomsonreuters.com; +1 312 408 8752; Reuters Messaging: doris.frankel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
CHICAGO, Oct 12 (Reuters) - With earnings season heating up, many option players are betting on a possible lift in the financial sector within the next few weeks.
Shares of the Financial Select Sector SPDR, an exchange-traded fund that holds all of the financial-related companies from the Standard & Poor's 500 index, was up 12 cents to $15.36 at the close.
The rise in the ETF was accompanied by a flurry of option activity, notably in the fund's calls allowing investors to buy its shares at a fixed price within a specified time period between now and mid-November.
In all, about 267,000 calls and 200,000 puts changed hands in the ETF, 1.7 times the normal daily combined turnover, according to option analytics firm Trade Alert.
Many investors gravitated to the November $16 call strikes, where massive transactions suggested more gains in the fund's price by expiration.
'The call buying we are seeing in the November options could be tied to bullish bets that the financial sector results will be better-than-expected,' said Jon Najarian, a co-founder of Web information site optionMonster.com.
At an average premium of 48 cents, investors holding the calls would turn a profit if the fund rises above the $16.48 break-even price by mid-November. The last time the fund crossed $16 was on Nov. 5, 2008.
'This would easily be achievable with the current head of steam the market seems to have,' said Andrew Wilkinson, senior market analyst at Interactive Brokers Group.
The November $16 call strike traded 162,087 times, well beyond the number of existing positions held by investors of 27,206 contracts, indicating new positions were initiated, Reuters data show.
The bullish sentiment also spread to the November $17 call strike, which attracted buying interest and had volume close to 20,000 contracts. Traders earlier paid an average of 19 cents to take ownership of 12,600 options, Wilkinson said.
There was also action in the front-month October $15 and $16 call strikes, contracts which expire on Friday, said WhatsTrading.com option strategist Frederic Ruffy.
The fund's components includes JPMorgan Chase & Co, Citigroup Inc, Goldman Sachs and Bank of America , companies that are due to report quarterly results this week.
Higher capital markets revenues may pull the largest U.S. banks' third-quarter earnings into the black, but many regional banks will struggle to turn a profit as loan losses rise further.
(Reporting by Doris Frankel; Editing by Diane Craft) Keywords: XLF CALLS/BULLS (doris.frankel@thomsonreuters.com; +1 312 408 8752; Reuters Messaging: doris.frankel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.