Banks have gone from hot to not. Financials, which was the best-performing sector after the election, is the worst-performing sector over the last month.
Traders are expecting even more volatility for the space as bank earnings begin to roll out later this week.
Nearly half of the XLF, the financials ETF, will be reporting earnings before April options expiration on Friday, April 21 — with Citigroup, JPMorgan, PNC and Wells Fargo kicking off the reports before the bell on Thursday.
The options market is implying a nearly 3 percent move in either direction for Citigroup, while JPMorgan and Wells Fargo are both expected to move about 2.25 percent, and PNC has an implied move of 2 percent.
"Year to date, the S&P is up about 5 percent, and the XLF is only up about 2 percent. [It's showing] very poor relative performance," Dan Nathan, of RiskReversal.com, said Friday on CNBC's "Options Action."
To play for a move lower, Nathan suggested buying the XLF April 23.5 put for 27 cents. This is a bearish bet that the XLF will fall below $23.23 by April expiration.
"This looks like a dollar cheap way to make a near-term bearish bet ... I think there's a good chance that between now and April 21, you're going to have a 1 percent down day," Nathan added.
From a chart perspective, Carter Worth of Cornerstone Macro agreed that the run in the financials may be out of steam.
"[The] financials outperformance peaked in December. It doesn't look like it's going to get any better [for the financials] ... it's just a bad place to be," he said Friday on "Options Action."
The XLF was trading in the $23.53 range on Monday.