Why Are Traders Still Bearish on This Insurance Firm?

XL Capital has been facing a negative trend recently, and yesterday the bears turned it up a notch.

OptionMonster's tracking systemdetected heavy put buying in the reinsurance stock, which has been under its 200-day moving average for the last three sessions. The June 15 contracts traded almost 13,000 times for $0.35 to $0.45, and the June 17s changed hands mostly for $0.90 to $1.10. The put/call ratio was heavily bearish at 28 to 1.

XL fell 2.13 percent to $17 yesterday. The reinsurance stock has been falling along with other financials and is down 15 percent in the last month.

Its last earnings report was stronger than expected, and shares bolted higher on May 12 after the company said it would stay in the S&P 500, but they have been falling since then.

Remember that XL was one of those really depressed financials that is still up more than 600 percent from its March 2009 lows. With a huge gain like that and the shares stalled near the highs, the bears might be thinking it needs to push lower.

Total options volume was more than triple the average.


XL Capital Competes With:



Alterra Capital


Options Trading School:




Najarian own an XL put spread

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