As financials look to end worst streak ever, some see more gains ahead

Talk about a bank job.

The XLF ETF, which tracks the financial sector, jumped higher Thursday ahead of the Fed’s annual CCAR stress test results. If the gains hold, the move will break a record 13-day losing streak for financials, but according to Dan Nathan of RiskReversal.com, there could be even more gains ahead.

On Wednesday, the XLF saw a surge in trading activity, with call options doubling that of puts. Within the activity was a purchase of 21,000 July 27 calls for 41 cents per contract. This is a bullish bet that the financials ETF will be above $27.41, or up about 3 percent from its current levels, by July expiration.

Financials are one of the worst-performing sectors this quarter and have fallen nearly 5 percent year to date. The group has been weighed down by the underperformance of big banks like J.P. Morgan, Bank of America, Wells Fargo and Citigroup — which make up more than 32 percent of the ETF’s holdings.

Still, Nathan believes the biggest catalyst for the group will come next month as many of the large banks prepare to report earnings.

“So in my eye you get a move in the XLF between now and July 20 close [of] about 3.5 percent in either direction,” he said Thursday on CNBC’s “Fast Money.”

Shares of the XLF are up more than 8 percent in the last 12 months and were trading higher Thursday afternoon at around $26.65.

Latest Video

  • The Final Call: MCD & QQQ

    CNBC's Melissa Lee and the Options Action traders discuss the stocks they'll be watching next week.

  • Trouble ahead for Twitter

    The social stock sinks. Is there more trouble ahead for Twitter? With CNBC's Melissa Lee and the Options Action traders, Carter Worth, Mike Khouw and Dan Nathan.

  • Fade the staples rally?

    Consumer staples soar. Should investors fade the staples rally? With CNBC's Melissa Lee and the Options Action traders, Carter Worth, Mike Khouw and Dan Nathan.

Tutorials

Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Options Action Traders

From Our Sponsor

Sign Up for Our Newsletter Options Action

Insight directly from the members of our Options Action panel
Get this delivered to your inbox, and more info about about our products and services.
By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.