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Financial ETF Lights Up Ahead of Major Earnings

Published: Tuesday, 13 Oct 2009 | 7:49 AM ET

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By: Pete Najarian
"Fast Money" Contributor

The XLF financial exchange-traded fund lit up our screens with large upside activity yesterday ahead of major earnings reports this week.

The call buying in the Financial Select Sector SPDR [XLF Loading... () ], which tracks the S&P 500's biggest financial names, may represent some optimistic positioning ahead of third-quarter results.

The calendar is filled with key reports this week, including JP Morgan [JPM Loading... () ] tomorrow, Citigroup [C Loading... () ] and Goldman Sachs [GS Loading... () ] on Thursday, and Bank of America [BAC Loading... () ] on Friday.

The ETF saw some huge positioning in the November 16 calls, where more than 162,000 contracts traded in a strong buying pattern for $0.42 to $0.52, according to OptionMonster's proprietary tracking systems. That was roughly six times the open interest at the strike, indicating newly opened positions, and dwarfed the average call volume of just 2,743 a day in the last month.

The XLF and closed yesterday at $15.36, up 0.79 percent on the session. The fund has struggled to stay above $15 and has not crossed $16 since Nov. 5, 2008.

The stock would need to rise at least 7 percent for the calls purchased yesterday to turn a profit before the contracts expire on Nov. 20.

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.

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Disclosure:

Najarian owns calls in XLF.

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Disclaimer