ETF Options Traders Look for Rebound in Citigroup, Big Banks

May.16.11 | About: SPDR S&P (KBE)

Options traders have been positioning for a rebound in financial-sector exchange traded funds that have large stakes in Citigroup (NYSE: C), Bank of America (NYSE: BAC) and other big banks, according to a report Monday.

A trend has emerged in recent weeks in options based on SPDR KBW Bank ETF (NYSEArca: KBE), the largest bank ETF by assets, Street One Financial said in a note to clients.

“The ETF closed on its 200-day moving average on Friday, its lowest close this year, but we have seen bullish-looking options flows in the ETF,” said Paul Weisbruch, vice president of ETF/options sales and trading at Street One.

“It is clear that the options investors are looking for a rebound in the sector in months to come. Top holdings of KBE include JP Morgan (NYSE: JPM), Citigroup, Wells Fargo (NYSE: WFC), Bank of America and US Bancorp (NYSE: USB),” he wrote in the report.

Similarly, there has been evidence of options traders looking for a bottom in the sector through Financial Select Sector SPDR Fund (NYSEArca: XLF).

The financial-sector ETF is down about 1% so far this year, compared with a roughly 7% gain for the S&P 500.

Financial Select Sector SPDR Fund

(Click chart to enlarge)