What's Behind Puts in Regional Banks

 |  About: SPDR S&P Regional Banking ETF (KRE)
by: optionMONSTER

By Chris McKhann

Shares of the SPDR KBW Regional Banking Fund (NYSEARCA:KRE) has become range-bound after a sharp run higher, and put buying is hitting the tape today.

The KRE exchange-traded fund trades at $26.87, down 0.37 percent on the day. It is up 30 percent in the last four months. But the fund still remains below the 52-week high of $29.79.

Almost 5,000 KRE options trade this morning against a daily average of 230 in the last -- admitted slow -- month. Dominating this volume is the action at the February 26 put strike.

A trader picked up 4,000 of those puts, 3,000 for $0.62 and another 1,000 for $0.68. This was against a previous open interest of 72, so it was a new opening position.

The put buying isn't tied to any stock trading on the day that we see, so this may be an outright bearish play looking for the KRE to give up some of its recent gains. Or it may be a protective hedge against existing long shares, which would certainly seem prudent given the run. And the average implied volatility has popped a bit higher, off the 52-week low of a couple of weeks ago.

Disclosure: No position