Interesting Action in a Big Financial ETF

Related: Tax Reform Plan Could Have a Treat for Banks

Some good news for XLF and friends is that the financial services sector is widely regarded as perhaps the only sector in the U.S. that is attractively valued relative to the broader market and its own long-term averages. The financial sector valuations still look relatively cheap, compared to the broader market. The sector’s valuations are still about 25% below the average since the early 1990s.

“Thursday’s accelerated put volume marks a change of pace in XLF’s options pits. Over the past 50 sessions, nearly 981,600 XLF calls have been bought to open on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to 381,619 puts. The resultant call/put volume ratio of 2.57 ranks higher than 97% of all comparable readings taken in the past year, pointing to an unusual bullish bias relative to bearish in recent months,” according to Schaeffer’s.

In the third quarter, the Federal Reserve confirmed it will begin unwinding its balance sheet and bond market participants continue expecting another interest rate hike in December, which could also benefit the financial services sector.

For more information on the financial sector, visit our financial category.