The U.S. Financials sector has unquestionably been one of the leaders from a relative strength standpoint compared to the broader market SPX (S&P 500 Index) year to date and in the trailing one year period, but it has still woefully underperformed the market in the trailing five year period (to the tune of some 4700 basis points).
That said, Financial Select Sector SPDR (NYSE: XLF) options, which are normally very active in the marketplace have seen an uptick in activity on the put side in recent sessions, primarily with near term April 17 strike options being purchased. XLF has an expense ratio of 0.18%.
With the ETF trading at $18.25 currently 6.8% out of the money (not including the premium paid for the options) but it is worth noting that this sector ETF was trading with a low $17 handle (albeit briefly), just a little under one month ago in late February ($17.10 ultimate low).
The April options expiration cycle here covers all of the expected earnings releases of the major bank components of XLF (JPM, WFC, BAC, C), and considering the unidirectional trend in XLF thus far in 2013, it seems some contrarians have emerged, and may feel that stock prices in the sector have outpaced company fundamentals.
Near term protective put activity was the theme once again in Financials via XLF options yesterday, as the high flying sector ETF has recently shown some signs of weakening. This has been a recent theme we have reported here in the
past week or so, as options flows (which consistently were made up of call buyers for several months in this sector ETF), have recently shifted to downside put buying.