$XLF Financials ETF - Oversold at Support

Dec 18, 2018

XLF Financials ETF - Looking oversold on the daily chart after closing red or flat for 8 straight trading days. Ending the day today right at a key support level just under $24. A bounce in the coming days definitely hinges on the FED not raising rates tomorrow. If they do nothing, I expect a near term price recovery in the XLF back to the $25-$26 range by year end.

With a lot of people expecting the worst, call options are looking fairly cheap in my opinion. I'm looking at the Dec 31st $24.00 strike calls that closed today around 40 cents. With a break even (excl. commissions) of $24.40 and the ETF closing today at $23.91, you would only need a ~2.1% move up from today's close to reach break even and you have about two weeks to do so. Depending on your risk appetite, you could move to the higher delta ITM (in-the-money) calls if you prefer.

If the FED does end up raising rates tomorrow, I think we could easily see $23 or worse by year end. Hedging with a straddle or strangle options play would probably be the smartest approach. But as in everything, higher the risk higher the reward.


Note: Informational analysis, not investment advice.

Dec 18, 2018

Note

Adding to bullish sentiment, some unusual call options activity today:
Around 15k $18.00 strike BAC Jan 2021 calls traded today deep in the money for a total premium of around $12M. A very bullish bet 3 years out. BAC

Dec 18, 2018

Note

BAC Bank of America accounts for about 8% of the XLF holdings