Previously, the Federal Reserve’s decision to hold off on an interest rate hike, ongoing economic weakness and concerns over trading revenues have weighed on the financial sector’s outlook. With higher interest rates in place, financial services ETFs entered 2016 as potentially important tells regarding what investors should expect from equities this year. The sector is the second-largest weight in the S&P 500 behind technology.
“For traders who are more comfortable with price risk, the Financial ($XLF) sector is trading with both a high raw premium of IV to HV and a high premium in annual terms. The Financial sector has been weaker in price terms and implied volatility seems to be reflecting that risk,” adds See It Market.
Consumer Staples Select SPDR