Financial ETF draws huge bearish bet

optionMONSTER

An enormous downside trade is targeting the SPDR Financial Fund, which remains just off the two-year highs reached last week.

optionMONSTER systems show that a single put spread accounted for nearly two-thirds of the 302,270 XLF options that traded in total yesterday. A block of 95,596 April 16 puts was bought for the ask price of $0.36, and two blocks of 47,798 April 14 puts were sold for $0.09 and $0.08. The open interest at each strike was fewer than 1,000 contracts, so this is clearly a new position.

The put vertical spread cost the trader $0.265, which is the amount at risk if the XLF remains above $16 through expiration in mid-April. The maximum gain of $1.735 would be realized if the stock is below $14 at that time. (See our Education section)

The XLF finished the session at $16.96, down fractionally on the day. The exchange-traded fund closed at $17.05 on Friday, just off the highs from February 2011. It was at support at $15 in mid-November and was last below $14 at the June lows.

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