It appears that some investors are still playing it safe when it comes to banks.
On Thursday, one trader placed a big bet against the XLF ETF, which tracks financial stocks. The trader bought 35,000 of the XLF Oct. 30 22-strike put options for 51 cents each. This is a $1.8 million bet that the XLF will fall below $21.49 by Oct. 30.
However, the bet hasn't been working in the trader's favor so far.
Bank stocks have suffered under a low-interest-rate environment, but on Friday morning the S&P 500 financial sector rallied 1.6 percent, rounding out the week with incremental gains.
CNBC contributor Dan Nathan said an increase in bearish bets against financials in the options market could signal a defensive move going into third-quarter earnings season.
"About 50 percent of the weight of the [financials sector ETF] is going to report between now and October 30th. So it could be a protection trade," Nathan said Thursday on CNBC's "Fast Money. "[Traders are] trying to get protection at this big support level into earnings."
Nathan also noted that while the price of options has spiked, trading could become more volatile in the weeks leading up to third-quarter earnings.
"There's a lot of room to go if things really get crazy in the next couple weeks," he said.