Financial ETF Lights Up Ahead of Major Earnings

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 , 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 tomorrow, Citigroup and Goldman Sachs on Thursday, and Bank of America 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.

Options Trading School:



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



Najarian owns calls in XLF.