Friday Options Update: XLF, C, CROX, JNPR, GDX, TOL, UHS, COLM, TEN

July 25, 2008

Rebecca Engmann Darst contributed to this report.

XLF – Early in the session today it looked as though financial issues might dust off at bit after yesterday’s ruinous rout, but most big bank stocks have reversed early gains and are now resolutely in the red as the market’s “dust bowl pessimism” continues to stick to the shoes of these stocks. Even during the gains of the early session, option traders seemed to show a knowing inclination to put spreads, continuing a trend that began Wednesday with the prolific spread activity in Wells Fargo (WFC), and continued throughout yesterday with action in Bank of America (BAC) and Citigroup (C). Shares in the financial sector ETF (XLF) are showing a downtick of .81% to $20.78 at present dispatch, as large block trades have driven the volume up to more than 560,000 active of the noon hour. We continue to see heavy buying pressure in August 18 puts on volume of more than 60,000 lots at this strike. Block trade action in the August 17 puts has continued throughout the morning, with a large raft of these puts apparently selling to the bid after some early buying pressure: the 23-cent premium on that position reflecting about a 10% likelihood of occurring. Elsewhere we saw fresh volume enter the middle of the market at the December 21 put line at $2.55 per contract. The takeaway here is that option traders appear readily positioned for a further unwind in the financials notwithstanding some intermittent catches of breath to the upside.

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